Massachusetts Recovers Millions in Lost Revenue from Employer Fraud and Misclassification - Texas? Not so Much...

The State of Texas is missing out on millions of dollars of tax revenue and Texas parents are losing millions in child support payments because of the failure to deal with payroll fraud and employee misclassification and the growth of Texas' underground economy. The Commonwealth of Massachusetts has proven this point by stepping up their own enforcement efforts. Why is Texas so far behind in this effort?

A report this week on the official MA website states their Labor and Workforce Development Department (LWD) (MA's equivalent of the Texas Workforce Commission) has recovered more than $21 Million over eighteen months from simply enforcing the law. MA has created a Joint Enforcement Task Force (JETF) on the Underground Economy. The JETF is composed of members of various state agencies including the state's attorney general and Insurance Fraud Bureau.

Tom Pauken, the former chairman of the Texas Workforce commission, called for the Texas Legislature to take action on these issues before the last session. Efforts were made in both the House and the Senate to put some teeth in the existing laws which need to be enforce, but because of backroom lobbying efforts of some in the home building industry, the bills died before ever getting a floor vote.

In Massachusetts, however, Governor Deval Patrick showed leadership by forming the JETF to re-establish fairness to the states economy.  In Texas, unethical companies are allowed to have an unfair competitive advantage by cheating the system without fear of enforcement or meaningful penalties if they were to get caught.

“The collaborative efforts of the Joint Task Force have worked successfully to bring businesses and individuals into compliance with our state laws,” said Attorney General Martha Coakley. “The money recovered this year demonstrates both the scope of the problem and our aggressive response to combat fraud and abuse. As the state’s sole wage enforcement authority, our office will continue to take action to protect workers, stop unlawful business practices and level the playing field for all companies.”

The report claims:

"Among notable accomplishments was the collection and disbursement of $1.17 million in unreported wages by subcontractors on the Marriott Copley Place, Boston (Host Hotels) renovation project, following a multi-month Joint Task Force investigation that began in the fall of 2011. Joint Task Force agencies also identified sub-minimum wage payments to workers; employers without workers’ compensation insurance policies; misclassification of workers; and unpaid Unemployment Insurance taxes by contractors and subcontractors working on this renovation project.

"The work of the Task Force is invaluable in reducing the growth of the underground economy in the state's construction industry,” said Mark Erlich, Executive Secretary-Treasurer of the New England Regional Council of Carpenters. “Taking on the illegal practices of wage theft, misclassification and tax and insurance fraud creates a more level playing field, which ultimately benefits legitimate employers, tradesmen and women and taxpayers."

This is what we need in Texas. We need to have the force of meaningful penalties in the existing laws related to employee missclassification. We need to stop companies from cheating workers, taxpayers, and parents.

The question of misclassification enforcement legislation needs to be asked to our gubernatorial candidates, the candidates for Attorney General of Texas and all candidates for the Texas Senate and House. Will they join with the ethical construction companies who seek to create a level playing field for all companies?  Will they support legislation and create a task force similar to that in Massachusetts so Texas taxpayers can recoup the losses of the past?

I have spoken with both Chairman Pauken and AG Greg Abbott about this issue in the past. I will continue asking these questions and I hope you will as well.