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Report: Bad Bosses Are Cheating Construction Workers and the Public Out Hundreds of Millions of Dollars

A newly-released report looks at how widespread fraud in the construction industry is hurting workers and their communities.

New York, NY – Just how badly are construction workers being ripped off in a town where a week’s pay often comes out of a plastic bag and the foundations of “billionaire’s row” are literally built on stolen wages? A new nationwide report out this week from the United Brotherhood of Carpenters [UBC] might help better gauge the “underground economy.” 

“How Cheating Hurts Us All: The Costs of Fraud in the Construction Industry” puts the number of construction workers either misclassified as “independent contractors” or “working off the books” at between 1.3- and 2.15 million. 

Seasonal work, according to the report authored by Allegheny College’s Russell Ormiston; Michigan State University’s Dale Belman and Harvard University’s Mark Erlich, pushes the numbers to between 1.45- and 2.41 million workers — or as many as 21.6-percent of construction workers nationwide.

Ripping off that many construction workers saved the bosses more than $17 billion in labor costs, while at the same time shorting state workers compensation programs an estimated $1.74 billion in 2017 alone. Although, the authors suggest the shortfall could actually exceed $2 billion. 

“[This week], the UBC announced the results of a study on tax fraud and it showed on the national level what we have been fighting against here in the NYC region for years— the enormous scale and impact of tax fraud on the American family and in our communities,” Joe Geiger, executive-secretary treasurer, NYC District Council of Carpenters, said in a statement.  “Lost revenue from wage theft means less money for public resources that should be dedicated to schools, infrastructure, veterans, and police and firefighters.”

As reported here earlier, the misclassification of workers as “independent contractors” rather than employees — with all the labor protections and benefits that go with that designation — is a widespread problem across many sectors, and, which pending legislation in New York State known as the Fair Play in Employment Act, is endeavoring to remedy. 

The authors of “How Cheating Hurts Us All,” meanwhile, estimate that, in 2017, being misclassified or forced to work off the books deprived U.S. construction workers between $811.1 million and a billion dollars or more in overtime and holiday pay.

“We commissioned this report by leading researchers because, for years, the main challenge slowing law enforcement and legislative action on combating tax fraud was a lack of data,” UBC General President Douglas J. McCarron said in a statement. “Now, with the release of this report, we are showing the enormous scale and impact of this issue and providing government officials with the knowledge to do something about it. We cannot allow businesses to continue to commit this fraud at the expense of our workers, our families, and our communities. It’s time for our leaders to step up and take action.”

Five years ago, the Manhattan District Attorney’s Office launched the Construction Fraud Task Force along with the New York City Department of Investigation, the Port Authority of New York and New Jersey Office of the Inspector General, the Metropolitan Transportation Authority Office of the Inspector General and the Business Integrity Commission for the City of New York — with the promise of gathering “the best of local law enforcement in a collective effort to root out” bad actors in the industry. 

This year, however, saw the resignation of Assistant District Attorney Diana Florence — former head of the Construction Fraud Tax Force — amidst charges she allegedly withheld case evidence.

Earlier this week, The City published parts of Florence’s January 21 resignation letter in which she stated, “Because of the events over the past year, I am no longer convinced that the Manhattan District Attorney’s Office is a place that values obtaining justice for all New Yorkers above all else.” 

With the release of “How Cheating Hurts Us All,” McCarron said that “Rampant tax fraud in the construction industry is not just a labor issue or an issue of workers’ rights” — but an “issue of fairness.”

“When corrupt businesses cut corners to dodge their tax responsibilities, their tax burden doesn’t simply go away; it shifts to their employees, to law-abiding businesses, and to the American people. Workers, responsible businesses, and taxpayers are fulfilling their civic duties and paying their fair share. It’s only right that these businesses do the same,” he said. 

Next month, the NYC District Council of Carpenters will take part in the 2020 Construction Industry Tax Fraud Days of Action slated for April14-18.

Said Geiger, “We will do everything we can to show our commitment to the hardworking men and women in NY that we will stand up for them and protect their services in the face of cheating construction industry players.”

Read the full report here.

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