Carpenters Union Challenges Fraudulent Contractors
Date Posted: April 13, 2023
Posted In: News, Workforce,
According to a new study, the state of Missouri is losing out on nearly $250 million each year because of shady construction companies and the Carpenters Union wants it to stop.
Carpenters Union representative R.J. Catizon addresses the Wentzville City Council on the problem of tax fraud in Missouri’s construction industry, Wednesday, April 12, 2023.
“We know who the bad apples are,” Gary Perinar, Executive Secretary-Treasurer of the Mid-America Carpenters Regional Council said. “They don’t play by the rules, they are hurting legitimate contractors and they certainly don’t care about the safety and wellbeing of their employees.”
In the study, UMKC economics professor Dr. Michael Kelsay found that fraudulent contractors neglected to pay $149.3 million in required state and federal income taxes and $96.7 million in workers compensation and unemployment insurance funds in a single year.
According to the Carpenters, the problem occurs when small, often out of state companies get hired to perform subcontracting work on construction sites. The union believes too many are misclassifying their employees as independent contractors, paying them off the books, and sometimes not paying them at all. The Carpenters are working with state and local governments to create investigative units, making it easier for victimized workers to blow the whistle and enforce existing tax laws that could help shut down suspicious contractors.
“While workers bear the primary burden of misclassification and wage theft, the ramifications of these illegal labor practices ripple throughout Missouri communities,” Kelsay said.
The study, which analyzed data from the Missouri Department of Labor, the U.S. Department of Labor and the Bureau of Labor Statistics, estimates that more than one in five Missouri construction workers fall victim to fraud. The union said that nearly 40 percent of U.S. construction worker families are forced to enroll in safety net programs to make ends meet, costing state and federal governments $28 billion annually.
Legitimate construction companies have a stake in how the labor union and political leaders address the problem. Since fraudulent contractors pay their workers in cash and well below the industry norm, they can easily undercut established construction companies to win bids.
“These law-abiding companies work hard to pay their people a decent wage, provide health insurance and other employment benefits but they can’t compete with the cheats who are playing dirty pool,” Perinar said.
The union estimates more than 2 million construction workers across the country are working for a fraudulent contractor. The victims, desperate for work, are often too fearful of retaliation to speak up. The union said it has talked to some exploited workers who tell stories of having to put in 12-hour days, six days a week, getting paid in cash, working in unsafe conditions and receiving no health insurance or other benefits.
To draw attention to the plight, the national Carpenters Union stages rallies and informational pickets in cities across the country each year during the April tax season. At city halls, post offices and construction sites union members hand out literature and inform the public of the illegal business practices they believe are tainting the entire construction industry.