Report: construction companies dodging workers’ comp payments

Sep 10 2014

It is perhaps ironic that the federal government enabled construction companies to dodge federal regulations as the firms hauled in federal contracts paid for by U.S. taxpayers. According to an investigative report by McClatchy newspapers, the 2009 stimulus that pumped hundreds of billions of dollars into a faltering U.S. economy also poured contracts and checks into the hands of construction companies that illegally misclassified workers as independent contractors. The widespread misclassification enabled companies to dodge payments on things such as mandated workers’ compensation insurance, unemployment insurance, and the employer’s share of Social Security and Medicare taxes.

The result for workers who were injured was that they were often on their own without workers’ comp benefits to replace a portion of their wages and without medical care as required by law for most employees here in Colorado. 

Workers also found that when laid off, they couldn’t get unemployment benefits; a tough road for workers to travel in the often boom-or-bust world of construction.

McClatchy says “the scheme persists in federal contracting,” though efforts have been made to stem the practice that cheats both workers and taxpayers.

How much has it cost? In Florida alone, McClatchy determined that taxpayers have been on the hook for “nearly $400 million a year in squandered tax revenue.” In North Carolina, the bill is nearly $500 million and “in Texas, a staggering $1.2 billion.”

What do the employers get out of it? First, they can win contracts away from competitors by underbidding. After all, their costs are substantially lower by calling workers “independent contractors” responsible for taking care of workers’ comp insurance, unemployment insurance, Social Security and Medicare costs on their own. Second, their bottom lines are fatter for much the same reason: workers’ benefits are barebones, if they exist at all.

In Colorado, we also see employees eligible for workers’ comp after an on-the-job injury denied benefits. Those employees have the right to appeal a denial with the assistance of an attorney, however.  

Source:, “Taxpayers and workers gouged by labor-law dodge,” Mandy Locke and Franco Ordoñez, Sept. 4, 2014