Texas Legislature - Time to Address Employee Misclassification and Payroll Fraud
It is time for Republicans in Texas to take a leadership role in solving the problem of employee misclassification and payroll fraud. During the 2011 Legislative Session there was good legislation put forward, but it did not get enough support from Republicans to move forward. These are not Democrat or Republican issues, but rather they represent principles of the rule of law and fairness. Republicans should not be tricked by some business leaders into believing this is anti-business legislation.
This past week, Scott Braddock of Construction Citizen reported about a hearing at the Texas Workforce Commission on the topic of Payroll Fraud and Employee Misclassification. Speaking to his fellow commissioners, Workforce Commissioner Ronny Congleton asked the Commission to press the Legislature to crack down on misclassification.
Congleton said, "We need to bring the rule of law to this enormous underground economy in Texas." Employee misclassification is used by many unscrupulous employers to avoid paying payroll taxes and to work illegal workers. Congleton continued, "We have to do something. Doing nothing drives honest employers out of business because they cannot compete."
Solving this problem is pro-business as well the right thing to do. It is pro-business because it protects companies that follow the law and properly classify their employees and withhold payroll taxes. It is the right thing to do because it stops unethical businesses from making unfair profits while driving legitimate companies out of business.
Marek Brothers Construction is one of those companies that follows the law on properly classifying employees. Marek's president, Stan Marek, spoke before the commission to explain the impact of the problem. He told the commission that “our employees are employees. We take good care of them. Our industry has gravitated to people more and more not wanting employees. This is rampant in our industry. If it doesn't change, our company won’t able to survive.”
That is the situation in many such cases. In addition to companies being put in an unfair competitive situation, taxpayers in Texas are also footing the bill for the unethical companies' behaviors. Millions of dollars are not paid to the Texas Workforce Commission because of employee misclassification. In addition to that, many deadbeat parents will hide from paying child support by working for companies that misclassify employees. The result is increased dependency of single parents on welfare to make up for the lost child support. Texas Attorney General Greg Abbott told this writer he was very concerned about this problem and is looking for changes this legislative session.
Because millions in revenue is now lost when companies cheat, Marek said taxpayers would be the winners if there was a real crackdown. “For every million the state spends to enforce the law, they'll get $5 million back,” Marek said.
For this to pass this session, Republicans will need to take a leadership role on this issue. This is an issue where we should be able to build bipartisan support as it truly is not a partisan issue.