Organized labor groups are pushing Missouri lawmakers to crack down on what they describe as widespread labor fraud in the construction industry, arguing the practice harms workers, undercuts legitimate businesses, and reduces state tax revenue.

The Mid-America Carpenters Regional Council recently launched a campaign aimed at contractors who allegedly pay workers in cash and operate outside standard payroll systems. Union leaders say these “off-the-books” arrangements allow some employers to avoid paying payroll taxes and required contributions for workers’ compensation and benefits.

Kevin McLaughlin, executive secretary-treasurer of the council, said the issue goes beyond cutting corners.

“These aren’t just shortcuts, it’s a predatory business model,” McLaughlin said. “Workers are left without protections if they’re injured, and the broader community loses out as well.”

Union officials argue that contractors who avoid taxes and insurance requirements are able to submit lower bids on projects, putting law-abiding companies at a competitive disadvantage. They also say the loss of revenue affects funding for public services, including infrastructure and education.

According to a study from the University of Missouri-Kansas City, construction-related tax fraud in Missouri results in an estimated $150 million loss in income tax revenue and another $100 million in unpaid workers’ compensation and unemployment insurance contributions each year.

To address the issue, the union is backing House Bill 2366, which would increase oversight of construction employment practices and strengthen penalties for worker misclassification and unreported labor.

The proposal would require more detailed reporting from contractors and expand the state’s authority to investigate job sites suspected of operating outside legal payroll systems. It also includes provisions that could hold general contractors responsible for violations committed by subcontractors working under them.

Mark Dalton, the union’s Missouri political director, said the legislation is intended to improve accountability across the industry.

“This is about making sure every worker on a job site is properly accounted for, insured, and paid fairly,” Dalton said.

Labor leaders also contend that undocumented workers are particularly vulnerable to exploitation in these arrangements, as fear of deportation or legal consequences may discourage them from reporting unsafe conditions or wage violations.

Supporters of the bill say the changes are necessary to protect workers and ensure a level playing field for contractors who follow the law.

“This is about fairness,” Dalton said. “When contractors break the rules, it impacts workers, businesses, and taxpayers across Missouri.”

Supporters say the measure ultimately aims to ensure Missouri’s construction industry operates on a level playing field, where workers are protected and employers compete under the same rules.