Last week, we talked about how DirecTV skirts labor and tax law by misclassifying its employees as independent contractors. On Tuesday, Pennsylvania Governor Ed Rendell signed into law legislation that will prevent construction companies from following in DirecTV’s footsteps.
Act 72, or the Construction Workplace Misclassification Act, subjects contracting companies who cheat the system by denying their workers’ rights to fines and criminal prosecution. In addition, there’s an “acting in concert” provision, punishing anyone who knowingly hires a contractor who is violating the act. Previously, attorneys could make a company repay unemployment compensation funds in cases of misclassification, but the state could not charge the employer with a criminal offense.
“It really will start to separate responsible contractors from irresponsible contractors,” said Jason Fincke, executive director of the Builders Guild of Western Pennsylvania.
The purpose of the law is not to eliminate independent contractors, but rather prevent construction companies from labeling their employees as such and denying them benefits.
Unfortunately, as its full name implies, Act 72 only applies to the construction industry. Truck drivers, computer programmers, writers, and cable installers like those employed by DirecTV are also frequent victims of misclassification. In total, Pennsylvania estimates that nine percent of their workforce is inappropriately labeled as independent contractors. And on a national level, the federal government estimates that it loses at least $3-4 billion each year in tax revenues due to misclassification.
Evading taxes and denying employees fundamental rights is one of the most unethical ways to do business. At least in Pennsylvania, companies that cheat to get ahead of the competition will now have to face the consequences.
Learn more about misclassification by reading our fact sheet here.