Why is Employee Misclassification Important to Texas and Texans (See Video)
by Bob Price on December 19, 2010 at 6:30 PM
Every day workers are picked up from day labor sites, many times by the same employer. Thousands of people are working in an underground economy where they are paid cash under the table. Still others are simply worked as misclassified "independent contractors" when in reality, they are employees. Why is this a bad thing? It is cheating and theft... What is being done about it? Not much in Texas... Why is Texas showing a near "blind eye" to the issue? Now, that is a VERY good question...
Several things happen when a worker is misclassified as an independent contractor. First, income taxes, social security withholding and unemployment insurance taxes are not paid into the system. This is theft from you and I, the honest hardworking taxpayers. Secondly, the unscrupulous or unknowing business owner is gaining an unfair business advantage over companies who act in an honest and honorable fashion.
Third, children are stolen from. How, you ask? Texas law requires that new "employees" be reported to the Attorney General's Child Support division and, if the employee owed child support, that the employer withold said payments and pay them directly to the AG's office. "Independent contractors" bypass this process and cheat their ex-spouses and their children of needed funds, many times making them dependent on welfare systems while the deadbeat parent is cheating the system.
Many states are begining to take action on this theft and cheating process. Construction Citizen reports that 26 states have signed employee misclassification and wage theft bills into law. The agency responsible for this in Texas is the Texas Workforce Commission, which, among its responsibilities, publishes guidelines and conducts audits of employers and worker issues, including misclassification. So far the agency has not indicated that there is a need for new legislation. With the increasing cost to Texas for unemployment benefits, perhaps that will change in this legislative session.
I have spoken with several Texas Legislators who have shown interest in looking at this issue. This is a good step, as it looks like Texas will need all the revenue it can muster for this next budget cycle.
In addition to the theft and cheating issues described above, the misclassified worker is also cheated. Many times they are paid less than prevailing wages for similar work. They do not receive the healt benefits of honestly reported employees. This also increases the cost burden on the Texas taxpayer. On top of that, they are deprived of a natural career advancement and achievement process that enables workers to climb out of the basement of the poverty economy.
Finally, the misclassification of employees serves as a magnet for illegal alien workers. Many hang out at dangerous day labor sites. These sites serve as a haven for other types of illegal behavior. Many of these workers are taken to job sites, worked for the day and then cheated out of their wages. Improving education about and enforcement of proper and lawful worker classification would help reduce the attractiveness for employers to hire illegal workers.
Recently, I spoke with a woman who was worked as a contractor in a portable cantina. She was worked in unhealthy conditions, many times not allowed bathroom breaks, nor the ability to wash her hands. At the end of her shift, she would be illegally charged back by the employee for food spoilage and low sales. This is a clear example of wage theft. Listen to her story and our attempt to talk with her former employer...
I have also spoken with many day labor workers who, after a full day of work, are paid and then robbed by others who loiter at these sites throughout the day.
Employee misclassification affects us all. It raises the cost of services provided by the state. It decreases revenues to the state treasury. It cheats children out of child support payments and it deprives honest hard-working people of the dignity of doing honest work for honest pay.
I will be reporting more on this topic throughout the legislative session. Please take an interest in this topic and talk to your state legislator about it.