From Workers' Compensation Institute:
by Liz Carey
While a recent California lawsuit vs. a contractor charged with misclassifying employees indicates crimes against employees is a continuing issue, some worker advocacy groups fear the current pro-business climate may mean fewer employers will pay for those crimes.
On Monday, the California Labor Commission announced it had filed a $6.3 million suit against CalCrete, a California concrete contractor, for forcing 290 employees to sign documents stating they were independent contractors instead of employees, as well as failing to pay the workers for overtime. The suit, Labor Commissioner Julie Su said, is one of many the state has filed against companies engaged in wage theft. For previous WorkersCompensation.com coverage, click here.
CalCrete declined to comment on the lawsuit despite several requests before press time.
Intentionally misclassifying workers allows companies to avoid paying taxes on the workers’ salaries, as well as avoid providing benefits, like workers’ compensation, sick time and unemployment insurance. And the crimes occur at all levels of employment, officials said.
“We are certainly seeing misclassification as a means of perpetrating wage theft and we see it in companies of all size,” Su said in an email interview with WorkersCompensation.com. “One example is in the port trucking industry where we have had almost 900 cases filed by individual truck drivers for minimum wage, overtime and unreimbursed expenses against trucking companies of varying sizes. We have issued approximately 300 decisions (the rest are still pending) finding the drivers misclassified in each one and ordering the companies to pay wages.”
The suit is just another example of a larger culture of worker exploitation, said David Kersh, executive director of the Carpenters Contractors Cooperating Committee, a worker advocacy group. His organization covers the southwest and sees many different kinds of schemes that benefit employers while ripping off employees.
“The Calcrete situation, where you have a company 1099-ing more than 200 workers, that fits into the national dialogue that we’re seeing,” Kersh said. “But there are a whole bunch of other schemes that employers engage in to steal from their employees.”
In Colorado, Kersh said in an interview with WorkersCompensation.com, the prevailing scheme seems to be putting labor brokers between employers and workers.
“You may have a drywall contractor setting up LLCs, and paying workers in cash,” he said. “For example, you may have 100 bodies on a project, working for 20 different labor brokers who are paying out the workers in cash with no taxes. In that case, you’ll have a document between two parties that says you’re a labor broker and it shields subcontractor from an employee relationship with its workers.”
Other schemes include splitting paychecks — where one employee gets paid and in turn, gives a portion of his paycheck to another employee. In those cases, Kersh said, you may have 40 workers on a project, but only 20 workers on the payroll, which reduces the employer’s workers’ compensation payments, and payroll taxes, among other things.
These schemes, Kersh said, threaten not only the employees, but also the economy.
“In Colorado and Denver especially, one of the fastest growing regions in the country, in the construction industry labor brokers and contractors are out of control. The labor market there is one step away from collapsing,” he said.
In California, Commissioner Su said her department doesn’t see the CalCrete case as an indication of anything, but views this sort of bad business behavior as bringing down whole industries.
“We wouldn't call it a trend away from other means of wage theft,” Su said. “And often violations go hand in hand. For example, in misclassification cases, the employer often does not have workers’ comp. But we are cracking down on cases like CalCrete because they not only steal earned wages from workers' pockets but they create a race to the bottom where other employers, in order to compete, do the same.”
But some worker advocacy groups worry that the current pro-business climate will empower employers to rip off workers, instead of do the right thing for them.
Ian Pajer-Rogers, director of communications for Interfaith Worker Justice, a national worker advocacy group in Chicago, said that they’ve seen incidents of wage theft on the rise.
“Obviously, the gig economy has played a huge role in companies misclassifying workers,” Pajer-Rogers said in an interview with WorkersCompensation.com. “But wage theft and misclassification of workers isn’t something new. It is, however, something that we’ve seen grow in the past five years.”
But their concern is that at the federal level, authorities may shift their focus away from cracking down on those businesses that engage in crimes against workers.
“We’ve had a long-term relationship with the Wage and Hour Division of the Department of Labor,” he said. “Our fear is that we’ll begin to see a shift away from enforcement and toward engagements. In other words, resources might be shifted away from enforcement of laws, and shifted more toward educating businesses about what is wrong.”
Read more from Workers' Compensation Institute.