In Texas, Members of Both Parties are Beginning to Recognize the Danger of Employee Misclassification
In Texas, select politicians have been looking to tackle the problem of employee misclassification for the past few years only to encounter hurdle after hurdle. In 2013, though, a revamped push to change the state’s laws is finding bipartisan support meaning the passage of House Bill 372, the Workplace Fraud Prevention Act, may be imminent (or at least visible way off in the distance, a start for a state as plagued as Texas is by this issue).
Filed by veteran Democratic Rep. Joe Deshotel, the bill would levy fines of up to $5,000 on business owners for each employee improperly classified as an independent contractor. The bill would also change the definition of independent contractor to someone who has registered with the Texas Secretary of State. The issue has come to the forefront in Texas as the construction industry continues to witness worker exploitation, unfair business advantages for cheaters, and improper payments to entitlement programs.
Some people are interested in this because it’s socially wrong and it hurts people as individuals and their families and they don’t get paid right,” Deshotel said. “Other people are supportive because it gives unfair [advantages] to their business competitors” who can offer lower bids because they pay lower wages.
The bill is a second attempt for Rep. Joe Deshotel who filed the same bill in 2011. That bill passed the House Committee on Business and Industry but never made it to the floor for a vote. Deshotel told the Texas Tribune that this will be among the only pieces of legislation he introduces this year in order to ensure its passage. The bill analysis claimed that,
40 percent of construction workers were working “off the books … resulting in close to $9 million a year in lost revenue in a single area of the state as a result of unpaid state unemployment insurance taxes and federal taxes.”
Around the state some city council members have grown impatient and want to take local action while the state gets its act together. In Fort Worth, Republican councilman Doug Miller is stepping up efforts to end misclassification of workers saying “it is time to do the right thing.” According to a report from ConstructionCitizen.com:
Miller is asking his fellow councilmembers to consider approving a city ordinance that would require all companies bidding on city contracts to certify that their employees are properly classified as employees and stop the unethical practice of misclassification. He is also asking for a requirement for these vendors to use eVerify for their employees.
Miller is calling on the Texas Legislature to take action stating, “I have expressed my support for a bill that will deal with this situation with my state representatives. I have also looked into having an ordinance in place in Keller that requires contractors that work for the city not to have illegitimate contractors, and in the coming year, if this legislation doesn’t pass, I will push something through on the local level.”
As a Republican, Miller is taking on business interests who do not want to see the current system changed but also playing to the GOP’s interest in tightening the immigration belt with the eVerify system. A former business owner, Miller says that over 20 years ago his business had to deal with misclassiication and make necessary changes. He argues to business representatives that laws are laws and must be followed:
“Would you rather put illegitimate companies out of business by fining them, or would you rather let legitimate businesses go under because they can’t compete?”
“We need to decide as a state and as a nation whether or not we’re going to follow laws or we’re just going to ignore whatever laws that we want just because it’s convenient for us,” Miller said.
Miller’s legislation will include a strong eVerify push. The tool, which checks one’s employment status using multiple databases to ensure workers are legal, has had support from the White House and has seen improvements to its functionality. In states like Texas, where large immigrant populations mean worker misclassification is rampant, there is no disassociating immigration and misclassification:
“This is tax money. If I vote to spend tax money, …the public has an expectation that that money isn’t going to illegal aliens.”
No matter the rationale it is encouraging to see both Democrats and Republicans agreeing on the importance of protecting workers from exploitation and protecting the state government from being robbed of needed revenue by unscrupulous businesses.