The fight against construction employer tax fraud is a fight for fairness.

At this year’s Tax Fraud Days of Action events, April 12–April 18, UBC members and councils will again stand up for exploited workers, for honest contractors and for ordinary, law-abiding taxpayers.

It’s time to take the advantage away from crooked construction employers who use illegal schemes to win contracts through lowball bids and line their pockets with ill-gotten profits.

Some of the cheaters’ illegal tactics include outright wage theft, misclassifying workers as independent contractors and failing to report payroll information to avoid paying premiums for workers’ compensation and other obligations.

A new study by the Economic Policy Institute details state-by-state losses in the U.S. for construction workers and others affected by misclassification alone. According to the study, on a national basis:

“(A) typical construction worker, as an independent contractor, would lose as much as $19,526 per year in income and job benefits compared with what they would have earned as an employee.”

In Canada, the residential construction industry has the notorious distinction of contributing 26 percent, or $13 billion, to the nation’s $61.2 billion underground economy. Canada’s burgeoning underground economy is responsible for $3.1 billion in lost provincial and federal revenues.

In the U.S., a study of fraud in construction from The Century Foundation disclosed $10 billion a year in state and federal tax fraud, $1.9 billion in overtime wage theft and $5 billion in unpaid workers’ compensation premiums.

Many who have been cheated out of wages also suffer injuries when cheating contractors operate unsafe jobsites. Employers who have cheated on their workers’ compensation premium obligations often shamelessly leave it to injured workers to pay for their own medical treatment—or the costs are passed along to the rest of us.

Insurance companies recover their fraud losses by raising premiums for responsible contractors, making them even less competitive against the cheaters.

The employer fraud crisis has drawn increased attention from the U.S. federal government. Last year, the Treasury Department issued a report, 2024 National Money Laundering Risk Assessment, which devotes a “Tax Crime” section to detailing how construction is an industry prone to human trafficking.

In addition, the federal Financial Crimes Enforcement Network (FinCEN) sent a notice to banks, check cashing stores and other financial institutions directing them to report suspicious transactions of their construction business account holders. FinCEN wrote:

“[FinCEN] is issuing this Notice to call financial institutions’ attention to what law enforcement has identified as a concerning increase in state and federal payroll tax evasion and workers’ compensation insurance fraud in the U.S. residential and commercial real estate construction industries.”

The employer fraud crisis is huge, but by standing up, we can defeat the lawbreakers:

• States and provinces can enact “upper-tier” contractor liability laws, so that general contractors, owners and others can be held responsible for the illegal actions of their subcontractors, including low-road labor brokers. These laws already exist in nine states and the District of Columbia.

• Insurance commissions and legislatures can reform the workers’ compensation system to defeat the insurer practices that enable premium fraud.

• District attorneys, attorneys general and law enforcement agencies can break apart labor-broker fraud schemes by holding those upper-tier contractors criminally liable as well.

Everyone can stand up to protest worker exploitation and support honest contractors and fair competition.

Join us during this year’s Tax Fraud Days of Action events, April 12 – 18.