Bill Gains Momentum in Push to Crack Down on Those Who Avoid Child Support Payments by Becoming “Subcontractors”
by Scott Braddock on May 19, 2015 at 9:19 AM
There’s a renewed push at the Texas Capitol to prevent people from skirting their responsibility to make child support payments through misclassification. Worker misclassification, also known as "payroll fraud," causes all kinds of problems throughout the construction industry and our society.
Misclassification happens when employers pretend their workers are "subcontractors” even though, by law, they meet the definition of an employee. You can read every story we’ve written about it by clicking here.
When unethical companies do this the intent is to avoid payroll taxes and benefits, which gives those employers an unfair and illegal competitive advantage over companies that are following the letter of the law. Just to be clear: There are many legitimate and legal uses of contract labor. The problem arises when businesses abuse the designation.
As the Construction Citizen Team has highlighted, misclassification also makes it more difficult for child support to be collected. Professional Janitorial Services Executive Don Dyer testified before lawmakers in Austin last year that there are many instances in which workers will actually ask their bosses to be misclassified so that they can avoid child support garnishments.
“When an employee is classified properly as an ‘employee’ companies will frequently receive orders to withhold part of the employee’s wages for child support,” Dyer said. “However, unethical companies that illegally misclassify their employees pass this responsibility on to the individual employee who then may not make their required child support payments.”
State Sen. Brandon Creighton, R-Conroe, has been working on a practical solution for this. He’s proposed a change in state law that would help expedite the collection process when a person is properly classified and then switches jobs. In other words, his legislation would make it more difficult for a person to be properly classified then switch employers and suddenly become a contractor, thus allowing them to avoid garnishments. As Julian Aguilar at the Texas Tribune reported, the bill would include “independent contractor” under the official IRS definition of “employee.”
As a former investigator in the Texas Attorney General’s Office, Sen. Creighton has firsthand knowledge of the frustration involved in trying to collect child support when someone tries to give law enforcement the slip in this way.
“One thing I saw consistently time and time again as we made our way through the pitfalls of the difficulties of collection efforts was exactly this,” Creighton told Construction Citizen. Employees would “convince their employers to misclassify them,” and the “employer sometimes often worked in collusion for their own benefit so they could avoid payroll taxes,” Creighton said.
Because 78 percent of the Attorney General’s collections are made through garnishments, “that’s tremendous when you have over a million cases for child support collection efforts,” Creighton said. “That was something that I saw and struggled with as one of the individuals working there.” Working with the Office of the Attorney General, Creighton developed the language now in SB 1727 so that the situation can be improved.
“That new hire status is really important because this information is always changing,” Creighton said. “How the Attorney General builds and modifies and updates their database is really important to staying on the front lines of making sure that manipulating these statuses and playing games in such ways don’t outrun the AG’s effort to get these kids the money they deserve,” he said.
About a month ago, Senate Bill 1727 was languishing in a Senate committee. In recent weeks, however, it has started moving through the legislative process fairly quickly. That’s important because time is running out in the legislature’s regular session, which ends June 1. The bill was approved by the Texas Senate and now its fate rests with the Texas House of Representatives, where it has been referred to the Juvenile Justice & Family Issues Committee.
Construction Citizen will continue to track the progress of Creighton’s legislation.