By Douglas J. McCarron
General President
United Brotherhood of Carpenters and Joiners of America

In a few days, thousands of Carpenters Union members will stand up and demand an end to construction employer tax fraud.

By taking part in Tax Fraud Days of Action, April 6–18, members of UBC councils throughout the U.S. and Canada will raise their voices against employers who are motivated by greed and guided by the fraud playbook.

Refusing to pay workers what they are owed, misclassifying them as independent contractors; failing to submit payroll deductions for income tax, Social Security and Medicare; and refusing to pay required workers’ compensation premiums are just a few of the playbook’s schemes. 

These crooked business practices do vast damage. They harm workers who are trying to make a decent living for their families, impair legitimate contractors who are struggling to compete, and steal tax revenue from federal, state and local treasuries.

A national study  by the Century Foundation shows the toll that tax fraud takes. Using conservative estimates, the study found:

Up to 2.1 million construction workers, or 19 percent, are misclassified as independent contractors or paid off the books.

Workers suffer $1.9 billion in overtime wage theft.

Workers’ compensation insurers lose $5 billion to employer premium fraud.

State and federal tax losses amount to $10 billion a year.

Employers at every level are involved, from small subcontractors and labor brokers to large developers and company owners. Those at the top often look the other way when their subcontractors fail to pay workers properly or otherwise cheat the system.

Big changes are needed to reform the construction industry, but we are already seeing progress.

We see it when workers are able to take legal action and stand up for their rights against employers. Ramon Rivas in Washington, D.C. told his story in our Tax Fraud Days of Action Worker Blog, detailing the monetary settlements he and his co-workers reached when their employer was confronted with their alleged wrongdoing.

We see progress when the playing field is leveled and legitimate contractors can compete. Allied Framing in Northern California was able to secure a contract based on its proposal for properly paid wages and benefits after a general contractor had to rescind its earlier contract with a company that went on to become criminally charged with wage theft. Vice President of Operations Jesse Carter told Allied Framing’s compelling story in our recent Contractor Blog.

Progress for workers and contractors amounts to progress for all taxpayers, because when employers abide by legitimate business practices, the expected revenues for our basic societal needs like public safety and education can be collected.

We still need big changes as we fight fraud every day of the year.

• More states must pass laws making upper-tier contractors liable for wrongdoing by the subcontractors they hire. Ten states and the District of Columbia have these laws, and they are helping to improve law enforcement.

• More city and county leaders, district attorneys and other officials need to tighten enforcement, so lawbreakers can be brought to justice.

• Insurance commissioners and legislatures need to reform the workers’ compensation system to modify the insurer practices that enable premium fraud. 

• Bankers must follow the rules about reporting suspicious transactions of construction account holders.

• Critically, employers must abandon the fraud business model—by insisting that subcontractors abide by the law, demanding proof of compliance and asking potential subcontractors how they plan to pay their employees and operate safely.

One thing is for certain. We’re not backing down until fraud and construction worker exploitation are eliminated. Join us during Tax Fraud Days of Action, April 6–18.