Carpenters Union Claims Multi-Million Dollar Payroll Fraud in Missouri and Kansas

In a shocking revelation, the Mid-America Carpenters Regional Council has accused employers in Missouri and Kansas of payroll fraud, costing the states millions of dollars in lost tax revenue and contributions to workers compensation and unemployment insurance funds.

Massive Fraud in the Construction Industry

Based on a pair of studies funded by the Council and conducted by the University of Missouri-Kansas City, it was disclosed that tens of thousands of construction workers in Missouri and Kansas are wrongly categorised as independent contractors. This misclassification enables employers to evade withholding income tax and exclude payments towards schemes like Social Security, unemployment insurance, and Medicare. The research estimates more than 30,000 workers across both the states are victims of this malpractice.

An Epidemic of ‘Enormous Proportions’

Dave Wilson, a long-standing representative for the carpenters union, compared the scale of the problem to an “epidemic of enormous proportions”. He illustrated two types of organizations in the construction industry: one that abides by the law, pays fair wages, and offers benefits and healthcare, and the others who exploit workers to avoid costs.

The fraud often manifests itself through underhanded payment methods where workers are paid in cash or via checks as if they were independent contractors, without any compensation being run through a payroll account. There have been instances where employees are paid using mediums like Venmo and Visa gift cards.

The Impact of Misclassification

This fraudulent practice not only shortchanges workers but also results in a loss to the state and federal government. Employers dodge contributions towards Social Security and Medicare, depriving workers of these benefits. Further, employees end up unprotected in case of job loss or work-related injuries due to the lack of payments into unemployment insurance and workers compensation.

UMKC economics professor, Michael Kelsay, highlighted the massive loss, estimating that the malpractice causes Missouri and Kansas to lose between $22.8 million and $95.2 million in annual state tax revenue. Moreover, around $100 million is missing from the state unemployment insurance and worker compensation funds.

Hard to Combat Unfair Practices

The Council has found it challenging to counter these practices, given the vulnerability of the workforce, primarily comprised immigrants, both documented and undocumented. These workers often lack awareness about the U.S. employment law, making it easy for employers to take advantage of them. Plus, fear of retaliation or deportation discourages many from speaking up against any unfair practices.

The studies call for immediate and strong enforcement measures to curb this wide-spread fraud, bringing an end to this modern-age exploitation of workers and safeguarding the states’ economies.