Union members and several state lawmakers filled the rotunda in the Pennsylvania Capitol on Tuesday to call for new measures to crack down on worker misclassification, tax fraud and wage theft as part of a nationwide initiative to shine a spotlight on labor issues.
Leaders from the Eastern Atlantic States Regional Council of Carpenters said that tax fraud and misclassification – the act of companies classifying workers as independent contractors rather than employees – results in lost benefits for workers and places a financial burden on taxpayers.
“These are issues that truly affect everyone,” said William Sproule, the Carpenters’ executive secretary-treasurer. “Vulnerable workers are preyed upon by labor brokers and unscrupulous contractors that know that they can save money by stealing wages from Pennsylvania workers. Because of actions like this, workers suffer while taxpayers lose out.”
Sproule pointed to a UC Berkeley Labor Center report that found that 28% of families of construction workers in the state are enrolled in at least one social safety net program. That figure is even larger across the U.S., with 39% of families enrolled in a safety net program – a figure that the report attributed, at least in part, to misclassification.
The UC Berkeley Labor Center estimates that the number of families enrolled in a social safety net program costs the state and federal government approximately $428 million each year.
“Our leaders need to continue enforcing the laws on the books and empowering workers to speak out when they are victims of wage theft and misclassification,” Sproule said.
Earlier this year, the Pennsylvania Department of Labor & Industry’s Joint Task Force on Misclassification of Employees released a report on worker misclassification, which found that roughly 389,000 workers are misclassified each year. Additionally, more than 11,000 misclassified workers were denied workers compensation in 2020, according to the report.
L&I estimates that the state lost between $6.4 million and $124.5 million in General Fund revenue due to misclassification in 2019.
While Tuesday’s event was largely focused on the construction industry, lawmakers said that misclassification extends beyond construction and also impacts gig workers. State Sen. Lindsey Williams, a Democrat from Allegheny County, criticized app-based companies, such as Uber, Lyft, DoorDash and Grubhub, for fighting to keep drivers designated as independent contractors.
“These app-based employers have used their power over their employees to push this misclassification agenda,” Williams said, noting that a bill from state Sen. Devlin Robinson, would classify app-based workers as independent contractors.
Robinson, a Republican from Allegheny and Washington counties, is the sponsor of Senate Bill 949, which would establish a state fund to dole out benefits for gig workers. “While app-based rideshare and delivery drivers want the freedom to set their own schedule, that should not mean they miss out on benefits and protections such as income replacement, workplace insurance, and legal protection from discrimination,” Robinson wrote in a co-sponsorship memo.
Williams, however, said lawmakers should instead pass legislation that adds teeth to the state’s Construction Workplace Misclassification Act by enhancing penalties for misclassification and requiring L&I to refer cases to the Office of Attorney General if a contractor violates the law more than once.
The joint task force report also listed 15 recommendations to address misclassification, including extending misclassification protections to industries beyond construction, increasing penalties for misclassification and allocating more funding to the Department of Labor & Industry – all of which would need legislative approval.