Pittsburgh Tax Fraud Task Force Shares Ideas About Protecting Workers, Combatting Worker Misclassification

PITTSBURGH – The Senate Labor and Industry Committee, chaired by Senator Camera Bartolotta (R-46), heard testimony from the Pittsburgh Construction Industry Tax Fraud Task Force about the dangers of misclassifying workers in the construction industry and what can be done to combat the practice.

The construction industry is one of the largest employers in Pennsylvania. In fact, the metropolitan area of Pittsburgh alone is home to more than 54,000 construction workers.

Task force members Steve Mazza of the Pittsburgh Building Trades and chair of the task force and Joel Niecgorski of the Eastern Atlantic States Regional Council of Carpenters stated that the construction industry is “a well-known haven for companies who misclassify their workers, fail to withhold taxes, ignore laws aimed at ensuring safe job sites and capitalize on worker exploitation.”

By misclassifying employees as independent contractors, construction companies do not simply avoid paying employment taxes, but also overtime and workers compensation premiums.

Misclassified or off-the-book workers do not receive important benefits and protections like minimum wage, overtime pay, workers compensation, unemployment insurance, Social Security, family leave and health care.

According to the task force report, there is significant motivation to commit construction industry fraud as contractors who misclassify workers or use labor brokers have a 30% advantage on bidding work.

Companies also use unscrupulous subcontractors who operate without proper licenses, carry no or insufficient insurance and operate in the underground economy through labor brokers that pay workers off the books, in cash or by checks with no deductions.

To combat this serious problem, the task force made five recommendations to the mayor of Pittsburgh: further define key terms so the opportunity to misclassify workers is reduced; further define criteria for suspension or revocation of licenses and increase civil penalties for violators; evaluate and amend the Office of Management and Budget’s contracting process to include penalties for labor violations; strengthen regulations on use of public subsidies; build stronger relationships with municipal judges as any and all changes made to regulations must be communicated to them; and create protections for workers to report labor violations so they are not penalized for coming forward.

“Thanks to the insightful recommendations that the task force shared today, committee members will be better informed as they consider legislation to more thoroughly protect workers and taxpayers alike,” Bartolotta said. “Personally, I will continue to engage with stakeholders in the construction industry to ensure legitimate, law-abiding contractors and their employees are the ones doing construction work in Pennsylvania.” 

CONTACT: Eric Kratz, 717-787-1463