The hunt for cheap labor has led to a rash of payroll fraud by companies scraping for any advantage in a sputtering economy, lawmakers say.
As a result, they say, American taxpayers are cheated out of millions, workers are underpaid and the injured are denied workers compensation. Lawmakers on Capitol Hill introduced legislation Tuesday, in conjunction with a Senate hearing, in an effort to curtail what they say has become a widespread practice that hurts not only workers but also law-abiding companies that can’t compete with the bad actors.
The issue is common in fields such as those for janitors, homecare workers and cable installers. But it’s especially prevalent in the construction industry, where a company can save as much as 30 percent of its costs by wrongfully reporting its workers as independent contractors instead of employees.
The practice is known as misclassification. In the most basic terms, if the employer is directing the worker, including setting his or her schedule, telling the worker what to do, when to do it and how to do it, the worker should be listed as an employee, according to federal rules.
By listing workers as independent contractors, companies can avoid paying insurance, taxes and overtime. It also shields companies from responsibilities of having to protect those working for them.
Matt Anderson of Ira Township, Mich., needs only to look at his left hand to see the potential...