From the Wisconsin Examiner, Erik Gunn discusses the issues of wage theft, misclassification and payroll fraud in light of a recent case in which a contractor was found guilty of not paying taxes. Erik writes:
Worker misclassification — labeling workers as independent contractors when they are employees and entitled to numerous state and federal protections — is more than just a matter of following bureaucratic rules.
Business operators who misclassify the workers they hire as independent contractors cheat the state and federal governments on taxes, Kahl says. They also cheat unsuspecting workers.
In addition to fostering tax fraud, “misclassification is a front for wage theft, unsafe working conditions, lack of health care [and] worker’s comp — all sorts of other things,” says Rebecca Meier-Rao, executive director of Worker Justice Wisconsin. The nonprofit helps workers who don’t have union representation learn about and assert their rights on the job.
“Is this the tip of the iceberg? 100% yes,” Meier-Rao says.
Worker Justice Wisconsin took a report in 2019 from four construction workers who had gone unpaid, she says. The reports were referred to the Construction Business Group, and one of the cases became part of the federal investigation that led to the charges against Reyes.
Misclassified workers risk not being covered by worker’s compensation or unemployment insurance. “There’s nothing put in their Social Security,” Kahl says.
Kahl estimates that by not covering taxes or insurance, the cheaters can gain a 30% advantage in the bidding process, underbidding competitors who are following the law. “A lot of people are getting very rich on this business model on the backs of the workers and to the detriment of law-abiding contractors,” he says.
On most construction projects the general contractor will farm out some of the tasks to subcontractors, and Kahl says the subcontractors are usually where the shady practices appear. He believes that the general contractors and their project managers can do more to vet subcontractors. “Some responsibility has to fall on them,” he says.