With tax season here, the construction industry is sounding the alarm on a billion-dollar scheme that allows crimes to go unchecked and the guilty unpunished.
Tax fraud and misclassification of workers is robbing federal, state and local governments of much-needed revenue, while ripping off vulnerable construction workers who are paid meager wages, and sometimes, not paid at all for their work.
We know who the bad apples are. They don’t play by the rules, they are hurting legitimate contractors and they certainly do not care about the safety and wellbeing of their employees.
The problem occurs when small, often out of state companies get hired to perform subcontracting work on construction sites. Too many are misclassifying their employees as independent contractors, paying them off the books or cheating them out of what they’ve earned. The Carpenters Union is working with state and local governments to create investigative units, making it easier for victimized workers to blow the whistle and enforce existing tax laws that could help shut down suspicious contractors.
While workers bear the primary burden of misclassification and wage theft, the ramifications of these illegal labor practices ripple throughout every Missouri community.
Data from the Missouri Department of Labor, the U.S. Department of Labor and the Bureau of Labor Statistics, estimates that at least one in five Missouri construction workers fall victim to fraud. Nearly 40 percent of U.S. construction worker families are forced to enroll in safety net programs to make ends meet, costing federal and state governments billions of dollars annually. That’s money they don’t have to pay for better roads, more schools and essential social services.
Legitimate construction companies have a stake in how we and political leaders address this problem. Since fraudulent contractors pay their workers in cash and well below the industry norm, they can easily undercut Missouri’s established construction companies to win bids.
The law-abiding companies work hard to pay their people a decent wage, provide health insurance and other employment benefits but they can’t compete with the cheats who are playing dirty pool.
It’s estimated that more than two million construction workers across the country are working for a fraudulent contractor. Those victims, desperate for work, are often too fearful of retaliation to speak up. We have talked to some exploited workers who tell stories of having to put in 12-hour days, six days a week, getting paid in cash, working in unsafe conditions and receiving no health insurance or other benefits.
While some lawbreakers have been prosecuted, and even sent to prison, many more accept fines and penalties as a simple cost of doing business. This won’t change until more of these crimes are investigated and
punishments are severe enough to scare the cheating contractors into stopping.
To draw attention to the plight, the national Carpenters Union stages rallies and informational pickets in cities across the country each year during the April tax season. At city halls, state capitals and construction sites union members hand out literature and inform the public of the illegal business practices we believe are tainting the entire construction industry.
Tax fraud and wage theft have become an epidemic in construction. It deserves everyone’s attention.
Executive Secretary-Treasurer of the Mid-America Carpenters Regional Council
