We have talked about the issues involving misclassifying employees before on this blog. This happens when an employee is labeled as a contractor or paid "under the table" or "off the books," when really they should be an official employee. It is a practice that almost always hurts the employee while benefitting the employer. In many cases, the employee is not even aware that the misclassification occurs.
This helps the employer because not only is it easier for the company to pay lower wages while also being able to hire people who would normally be ineligible; but it also allows them to skirt payroll tax laws. Here in Texas, this is an especially common practice in the construction industry, according to a new report.
The study found that roughly 300,000 construction workers in Texas (comprising 40 percent of the industry's workforce) are purposely misclassified by employers. That has led to millions of lost unemployment taxes and billions lost in federal income taxes.
State officials and members from the construction industry are discussing ways to reformat our laws to address the issue, but it is unclear when things will get done exactly.
In the meantime, this serves as a good reminder that there are shady employment tactics abound, regardless of industry. As this new study shows, the construction industry is prone to misclassification tactics. But it can happen in other fields too -- and again, in some cases, it is very hard for the employee to notice these things. It can result in lower wages or other consequences.
Source: Texas Tribune, "Report: Employee Misclassification Costs State Millions," Julian Aguilar, Jan. 29, 2013
- To learn more, please visit our Houston wage and hour page.