Each year over Labor Day weekend, the American construction worker gets praised and recognized in countless speeches and commentaries as the “backbone” of our nation, as a major contributor to the economic vitality of so many of our communities.
Yet the sad reality is that many workers are exploited by criminals within their own industry — unscrupulous contractors who keep their employees off the books, refuse to pay taxes, ignore safety requirements on job sites, and misclassify their employees in order to avoid providing medical coverage and other benefits.
Keeping employees off the books is an illegal practice, but common in the construction industry. It benefits contractors who line their pockets with ill-gotten profits that should be going instead to local, state, and federal taxing authorities.
These tax cheats also fail to pay their workers a fair living wage and rarely provide medical coverage, overtime, and workers’ compensation premiums. This gives them a substantial competitive edge when it comes to bidding on public and private jobs against contractors who absorb all the costs related to paying taxes and health and worker’s compensation.
In Philadelphia and other cities, elected officials and enforcement agencies have formed tax fraud task forces and advisory groups, using experienced members of the industry to help expose worker exploitation and enforce laws aimed at protecting construction workers and ensuring that everyone pays their fair share of taxes. The Carpenters union was part of a coalition that called for the formation of a Philadelphia ad hoc group on tax fraud. We are now working with others in the industry to address the issue.
These local and regional task forces are getting results. A recent joint investigation between the New York State Department of Labor and the Manhattan District Attorney’s Construction Tax Fraud Force led to a plea agreement that will return approximately $6 million in wages to exploited construction workers. The New York investigation uncovered that from November 2013 until December 2017, Queens-based AGL Industries consistently reported fraudulent financial information and cheated workers by not paying them full wages owed or overtime.
Most Americans pay their fair share of taxes, and there are consequences for those who don’t. Aside from the impact on the federal treasury — estimated to be $450 billion a year in lost revenue — state and local governments lose millions each year when construction and other companies pay their workers off the books, or intentionally misclassify them as “independent” contractors.
Successful joint investigations like the one in New York can be replicated here through the Philadelphia Tax Fraud Task Force. With all participants working together, we can expose those who commit tax fraud and help those who are not being paid get their fair share. As a member of the task force, I look forward to continuing our work for the industry and the community as we fight back against these practices.
For more information on the misclassification of workers and the consequences to taxpayers, go to http://standinguptotaxfraud.net/.