Employee Misclassification Raises its Ugly Head Again - Costing TWC Millions in Lost Taxes
by Bob Price on July 14, 2011 at 6:16 PM
Employee misclassification raises its ugly head once again. This time in a Dallas area school district that is building a new Center for the Performing Arts using contractors who are not properly classifying their employees. This report comes from WFAA TV 8 in the Dallas area. Their story amplifies what we have been previously reporting at TexasGOPVote about the costs to Texas because of misclassified workers.
Previously I discussed the missed opportunity to address this issue in this last legislative session. Republican leadership needs to get a handle on this issue and the WFAA story helps illustrate why. Let's take a look.
Mansfield, Texas is located southeast of Fort Worth. It is a growing community with a rapidly growing school district. For some reason, in this season of budget cuts and reduced school budgets, Mansfield Independent School District (ISD) has decided to build a $39 Million Center for the Performing Arts! Let's take a look at what is happening on this construction site...
Yes, you heard that right. With unemployment numbers still rising, Texas is missing out on an estimated $175 million dollars a year, just in unemployment taxes. This does not take into account the federal taxes, workman's compensation insurance and child support dollars that are also lost because of unethical companies cheating the system.
The other element in the room is these jobs are magnets for the illegal immigration problem. Because contractors are not reporting these workers, many hire illegal aliens to do the work and often times cheat them out of their wages. Wage theft is not limited to the illegal aliens, however. As you will see in the following interview I did with a construction foreman, Bobby Herndon, on a job in Houston at a new Wal-Mart store, these unscrupulous employers will cheat anyone they choose. Herndon was working for Carole Johnson Builders, LLC.
Following is a check received from Carole Johnson Builders, LLC for some of the work he did. As of the interview I did with him, he has been unable to cash his check. Many other of the workers he supervised are in the same situation of having been cheated out of hours worked and being issued checks that would not clear according to a story on Construction Citizen, a website that promotes ethical hiring and employment practices in the construction industry.
Bobby Herndon's Lost Labor Check
As indicated in the WFAA story, an estimated 1 in 3 workers on these types of construction sites are misclassified. Why, because it gives the company an unfair advantage over ethical companies who try to follow the law like Linden Steel referenced in the story above. Linden Steel owner Andy Anderson told WFAA he can never be as cheap as AB Rebar (the company who won the bid and admitted not paying payroll taxes). He said, "There's just no way a bona fide contractor is going to compete with these guys."
There is a way, but it is going to take work from all of us. In this legislative session bills were introduced to put some teeth into the misclassification and wage theft laws of Texas. The bills received bipartisan support in the committee that first heard the bills but died in Calendars Committee after the AAB and Perry Homes allegedly put pressure on the Calendars Committee to kill the bill. Sound familiar?
Employee Misclassification is cheating us out of revenue that should be helping Texas make up its budget shortfall. It is also cheating good companies from the opportunity to win business ethically and provide good paying jobs for Americans who are wanting to work. Finally, it continues to attract the illegal alien migration train. We need to either enforce the laws or get rid of the laws governing employee misclassification. The chaos that goes on now is not good for business. It is not good for Texas and it is not good for all of us.
PS. Shame on Mansfield ISD for wasting taxpayer money building this center. I wonder how many teachers they are threatening to lay off due to budget cuts?
This is what the $39 million facility will look like when it is finished. Built with the money equivalent of blood diamonds, the taxpayers of Mansfield ISD should be proud of this building built by some allegedly unethical contractors.