- Colorado Gov. John Hickenlooper, through an executive order, has created a task force that will investigate and find ways to combat the misclassification of construction-industry employees as independent contractors, which leads to other acts of payroll fraud like nonpayment of payroll taxes, unemployment tax and workers' compensation insurance premiums.
- The task force includes representatives from groups like the Colorado Department of Labor and Employment, Associated General Contractors of Colorado and the Southwest Regional Council of Carpenters. The task force will attempt to improve how state and other relevant agencies investigate and share information about alleged cases of misclassification; make filing complaints easier; educate employers as to the difference between independent contractors and employees; and increase public awareness about the negative effects of misclassification.
- According to the governor, misclassified employees are hurt by this practice, and construction companies that follow the rules are being "undercut" by those companies and labor brokers that misclassify employees in an effort to lower their cost of doing business. The task force will report to the governor annually about its efforts and successes and make recommendations for administrative, regulatory or legislative changes it considers necessary.
According to the United Brotherhood of Carpenters, when companies misclassify employees as independent contractors it can give them a 30% bidding advantage over legitimate businesses because they don't pay the labor costs — taxes, insurance, benefits — that everyone else has to pay.
But given the number of construction sites and the relatively limited resources of state and local agencies, the job of nailing down those who are misclassifying their employees or committing other payroll-related offenses can be a daunting one. Nevertheless, the authorities have been scoring wins in this arena.
Last November in Florida, a Department of Financial Services investigation resulted in the arrest of contractor Carlos Contreras for underreporting the number of employees, payroll amounts and type of work performed in order to get out of paying about $1 million in workers' compensation premiums. Authorities allege that although Contreras paid out $6.5 million in payroll between January and August 2017, he reported on his workers' compensation insurance application that he had annual payroll of only $274,000. If convicted, Contreras faces up to 60 years in prison.
Manhattan District Attorney Cyrus R. Vance Jr. announced in December that his office was going to aggressively pursue those companies that committed wage theft and other payroll fraud. Last month the DA's office indicted New York City contractor Parkside Construction and related companies for shorting workers more than $1.5 million in pay and underreporting payroll amounts to the New York State Insurance Fund so that it could get out of paying more than $8 million in workers' compensation premiums.