Worker Misclassification: Taxpayer-Subsidized Corporate Tax Fraud
When companies intentionally misclassify employees as “independent contractors” to avoid paying taxes on these workers, guess who ends up paying?
You do – to the tune of hundreds of millions of dollars a year.
This is the first in a series of articles I’m writing with New Orleans attorney Gregory J. Hubachek highlighting potential solutions to issues affecting the (shrinking) American middle class:
The focus in this piece is on Louisiana but this is a national problem. Every year unethical contractors across America are pocketing hundreds of millions of dollars at taxpayer expense.
Although this practice spans many industries, it is most prevalent in dangerous jobs such as construction and transportation.
The potential cost savings to be gained by breaking the law and misclassifying workers are substantial. By hiring you as an independent contractor, your construction boss doesn’t have to pay workers comp insurance on you. He also doesn’t have to pay social security or Medicare taxes. Hell, he doesn’t even have to pay you overtime.
Better yet, if you get hurt, well, too bad for you. Should have been more careful. Uninsured workers who are seriously injured often end up on social security and Medicare, unable to work and unable to support their families.
Some contractors use even more insidious ploys to line their pockets, such as setting up shell corporations to protect them from financial responsibility for injured or disabled workers. (Read Joseph Barrs’ story in McClatchy News’ impressive Contract to Cheat series.)
And, unsurprisingly I suppose, there’s often a racial element to misclassification. In this piece on misclassification fraud in Minnesota, Roofers Union representative Jose Navejas recalls a situation at the downtown arena that is home to the NBA’s Minnesota Timberwolves. According to Navejas, the contractor who was installing a new roof on the Target Center hired two separate crews to complete the job. The daytime crew were all white and were paid legal benefits and wages, Navejas says, while the night crew of Latinos “and one African-American” were paid less, even though they were working in unsafe conditions.