Credit: By: Andrew George for New Jersey Biz
Bill Sproule, the president and state regional manager for the Northeast Regional Council of Carpenters, says the growing practice of using “off-the-books labor,” or employees “misclassified” as independent contractors for construction jobs is detrimental to organized labor.
Last year, Stockton University’s William J. Hughes Center for Public Policy was contracted by several trade unions and organizations, including the Bricklayers and Allied Craftworkers Labor Management Committee of New Jersey, the Carpenter Contractor Trust, the Associated Construction Contractors of New Jersey and the Masonry Contractors of New Jersey, to study the scope and impact of the state’s alleged underground construction economy.
Stockton found the size of the state’s underground construction economy to be worth around $640 million, with ranges from anywhere between $528 million all the way up to $1.2 billion, and comprised of roughly 35,000 employees working off the books. The report added that the state’s total underground economy ranges between $7.3 billion and $16.3 billion.
Between underground activity and worker misclassification, the report indicates that the state is losing out on potentially more than $20 million in possible tax revenues and unpaid unemployment insurance from the construction industry alone. And that may be a conservative estimate, officials said.
Without placing blame on misclassified workers, trade union officials say that they want them to be able to “come out from the shadows” and participate legally in the workforce. But with an ever-evolving national discourse on the status of immigration laws that has become increasingly volatile since President Donald Trump’s administration came into office in January, industry officials and analysts are largely unsure of how to proceed.
“It’s very much an economic issue,” says Darlene Regina, chief operating officer for the ACCNJ. “You pay your fair taxes, I pay mine. Everybody, let’s level the playing field.” Echoing the shared sentiment of many trade union officials, Regina added that the purpose of the report was not to single out the misclassified worker, but rather the policies, or lack thereof, that allow the practice to continue. “If we educate the public they will realize that we’re not trying to hurt a certain workforce,” Regina said. “We’re very much focused on diversity, on growing our workforce.”
Trade union officials point to the misclassified workers themselves. Without the protections of workers’ compensation laws and anything resembling adequate benefits, the wear and tear of physical labor, both in the short term and especially over a long period of time, can be potentially devastating for misclassified workers. “They’re absolutely being exploited,” Sproule said.
There are laws currently in place to combat the practice’s rise, but industry officials say that, between a lack of enforcement and minimal penalties for cases that are caught, delinquent contractors don’t feel threatened by the unlikely chance they’ll be presented with anything more than a figurative slap on their wrists.
“The penalties that have been in place for 30-plus years now need to be increased so that it’s not just the cost of doing business,” says BACNJ Director Rich Tolson.
As identified in the report, enforcement is seemingly an issue due to a lack of resources, as just seven field staffers out of 25 at the state Department of Labor and Workforce Development are dedicated to misclassification. Between 2014 and 2015, just over 35,000 field inspections resulted in the assessment of $2.6 million in penalties for misclassification.
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