July 17, 2017
The Honorable Orrin Hatch The Honorable Ron Wyden
Chairman Ranking Member
Senate Committee on Finance Senate Committee on Finance
219 Dirksen Senate Office Building 219 Dirksen Senate Office Building
Washington, DC 20510 Washington, DC 20510
Re: Worker Misclassification Enforcement in Tax Reform Legislation
Chairman Hatch and Ranking Member Wyden:
Employee misclassification in the construction industry has created an uneven playing field that rewards bad actors while robbing employees of benefits and local jurisdictions of tax revenue. Misclassification occurs when an employer improperly classifies an employee as an independent contractor to gain a competitive advantage at the expense of responsible, lawful companies and depriving employees of benefits they deserve.
Companies that deliberately misclassify employees benefit from a competitive advantage over companies that comply with employment laws and regulations. Misclassification allows companies to avoid paying appropriate Social Security and Medicare taxes, federal and state unemployment insurance taxes, and workers compensation premiums. With these ill-gotten savings, companies can scam the system and steal business from their competitors by undercutting project bids.
Misclassification deprives employees of benefits they deserve as well as federal, state, and local governments of money they are owed. It is estimated that between $3-4 billion in federal income and employment tax revenue is lost each year due to worker misclassification. The federal government should reform existing tax law to identify bad actors so the government can recoup lost tax revenue and ensure all businesses compete under the same rules. This type of payroll fraud also includes paying workers "off the books", frequently involving undocumented workers.
Construction Employers of America, representing seven specialty construction trade associations and 1.5 million employees, urges the Committee to include worker misclassification enforcement as a revenue generator in tax reform legislation. This will bring violators to heel and ensure the proper payment of federal taxes.
CEA’s seven employer associations include FCA International, International Council of Employers of Bricklayers and Allied Craftworkers, Mechanical Contractors Association of America, National Electrical Contractors Association, Sheet Metal & Air Conditioning Contractors National Association, Signatory Wall and Ceiling Contractors Alliance, and The Association of Union Constructors. Our impact on the American economy is significant. We represent over 15,000 employers nationwide. If you or your staff would like to discuss this issue further with CEA and our members, you may contact me at email@example.com or 202-637-6820.