As the national economy struggles to regain traction, some construction companies are tempted to cut costs by hiring workers off of the books and then not contributing to workers’ compensation insurance funds for those employees.
Instead, the companies pretend their employees are “independent subcontractors” who are providing their own health insurance, workers’ comp coverage, payroll taxes and the like.
Yet who pays the costs of injuries when those workers are on the job? It’s typically those of us who play by the rules, who pay our taxes and who are responsible for our actions.
Payroll fraud of this sort plagues the construction and trucking industries, where employers will break the law in order to increase profits and cut costs to the bone.
In some cases, illegal immigrants are hired to fill these positions for employers eager to skirt responsibilities. Illegal immigrants typically are unwilling to talk to law enforcement officials about any violations of the law by their employer because they fear deportation or worse for themselves if they speak up.
In Texas, a state known for its low unemployment rate, it’s estimated that 40 percent of construction workers are misclassified as independent subcontractors by employers involved in payroll fraud. The state loses tens of millions of dollars in unpaid workers’ compensation coverage, unemployment insurance payments and payroll taxes, while the federal government loses billions in payments to Social Security.
When those workers are injured on the job site, they’re often dropped off at a public hospital with no workers’ comp coverage. Ultimately, it’s the public that picks up the tab for those injuries, while the workers are left to fend for themselves when it comes to long-term care, physical rehabilitation, wage replacement and the like.
Source: Dallas Morning News, “Scott Braddock: Purge Texas’ underground economy,” Jan. 2, 2013