The Pennsylvania Senate Labor and Industry Committee heard testimony Tuesday from the Pittsburgh Construction Industry Tax Fraud Task Force regarding misclassification of workers in the construction industry and how to combat it.
Task force members Steve Mazza of the Pittsburgh Building Trades and chair of the task force and Joel Niecgorski of the Eastern Atlantic States Regional Council of Carpenters said that employee misclassification in one of the state’s largest employing industries allows bad actors within the industry to skirt tax laws, ignore labor laws aimed at ensuring safe work environments and exploit workers.
By classifying workers as independent contractors instead of employees, unscrupulous construction companies can avoid paying employment taxes and avoid paying overtime benefits, workers’ compensation premiums, unemployment insurance premiums, and Social Security payments.
In committing this kind of industry fraud, the task force members said, bad actors in the industry can see a 30 percent advantage on bidding work. Companies can also use subcontractors who might operate without the proper licenses or insurance and who may operate through underground labor brokers who pay workers off the books, in cash, or by checks with no deductions.
The task force members recommended officials further define key terms to reduce opportunities to misclassify workers. Additionally, the members recommended officials further define license suspension or revocation criteria and increase the civil penalties for misclassification violators. Officials should also strengthen their relationships with municipal judges to communicate changes in regulations to them and strengthen the lines of communication with workers so they can report labor violations without facing penalties for coming forward.
“Thanks to the insightful recommendations that the task force shared today, committee members will be better informed as they consider legislation to more thoroughly protect workers and taxpayers alike,” Sen. Camera Bartolotta (R-46), chair of the Senate Labor and Industry Committee, said. “Personally, I will continue to engage with stakeholders in the construction industry to ensure legitimate, law-abiding contractors and their employees are the ones doing construction work in Pennsylvania.”