November 13, 2023

The Century Foundation (TCF) published a new report detailing the “enormous” costs associated with misclassification in the construction industry. In the report, TCF found that, nationally, 1.1 to 2.1 million construction workers were estimated to be misclassified or paid off-the-books and that there are reasons to believe this figure may undercount the true extent of the problem. The report explains that misclassification has significant costs to individual workers through lost workers' compensation insurance, unemployment insurance, and lost overtime pay. It also notes that by misclassifying their employees, employers avoid paying their fair share of taxes to programs such as Social Security and unemployment insurance. Moreover, the report estimates that unscrupulous employers in the construction industry that misclassify or resort to off-the-books payments are underpaying workers and shortchanging payments toward legally required benefits (such as Social Security, unemployment insurance, and workers’ compensation) by over $12 billion per year, costing taxpayers between $5 and $10 billion per year.

This new report comes as SWACCA awaits the final version of the Department of Labor’s SWACCA-supported independent contractor final rule and comes on the heels of the work SWACCA did to get the joint Financial Crimes Enforcement Network and Internal Revenue Service notice warning financial institutions to take extra precautions to prevent the banking system from being used to facilitate a “concerning increase in state and federal payroll tax evasion and workers’ compensation insurance fraud in the U.S. residential and commercial real estate construction industries.”

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