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A recent article highlights the propensity of the building industry to misrepresent employees as independent contractors, and points out that the government is planning to do something about it!
A New York Times article published today, Investigating Mislabeling of Workers, highlights Gov. Eliot Spitzer’s plan to “step up enforcement against thousands of companies that illegally misclassify workers as independent contractors to cheat on taxes and skimp on employee benefits.” This announcement comes on the heels of a February, 2007 Cornell University study: The Cost of Worker Misclassification in New York State.
The state labor commissioner, M. Patricia Smith, targeted the initiative directly at the building industry: "We're most concerned about the problem in the construction industry right now," she said.
This is not a new finding, however. A report from 2000 cites the construction industry as “contain[ing] the highest incidence of [worker] misclassification” (Planmatics, Inc. for U.S. Dept. of Labor, 2000, pg. 41). The recent Cornell study reported on these findings by asserting, “The construction industry is particularly prone to worker abuse through misclassification. Studies conducted by the U.S. General Accounting Office for the U.S. Department of Labor underscore that the current construction industry stands out both as the industry with the highest percentage of independent contractors (22%) but also as the industry with the “highest incidence of misclassification” (Donahue, Lamare, Kotler, 2007; pg. 8). The study found that nearly 15% of construction workers are misclassified.
This trend of accountability could spill over out of the North-East, and greatly affect the entire construction industry. One of the Cornell study’s writers, Fred. B. Kotler, is quoted as saying, “Misclassification is clearly a major problem in New York State, as it is nationally. It is a problem not only for the workers who get cheated, but it’s a problem for the state’s business climate. It creates an unlevel playing field because some companies are taking unfair advantage.” (bold emphasis added)
Furthermore, the study directly recommends government officials “Conduct High Profile Enforcement,” and specifically requests “high visibility enforcement directed against employers who intentionally misclassify workers, particularly in industries–such as construction–where the practice is widespread” in order to “send a powerful message to those who now abuse the system or are tempted to do so” (Donahue, Lamare, Kotler, 2007; pg. 14 — bold emphasis added).
With such a public and high profile request, it is doubtful that the maneuvers of the New York Labor Department will be the only reaction to this study, especially since misclassification nationwide could be responsible for billions in lost tax revenue. And since the highest profile firms are nationwide actors, I would not be suprised to see numerous other state governments follow NY’s example, possibly even involving federal agencies.
Players within the industry should keep a keen eye on New York’s and other states’ reactions to these accusations. Even more targeted labor audits are likely to follow in the report’s footsteps.
The U.S. Department of Labor’s official building job numbers, especially homebuilding labor statistics, have become repudiated on blogs and in articles all over the web. I highlighted the issue in a recent blog post including the residential housing sectors’ faulty job numbers. This article makes me ponder even further: why even have construction labor statistics? It seems that lately, the only thing being focused on is all the different ways in which they are wrong!
Please post your reactions and comments to this article here!
Please feel free to e-mail me any questions or comments as well: MAvera@TopBuildingJobs.com
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