Unscrupulous construction contractors are costing Pittsburgh and the commonwealth tax dollars, members of the Pittsburgh Tax Fraud Task Force told members of the Pennsylvania Senate Labor and Industry Committee during a hearing Tuesday.
The Pittsburgh task force was formed in 2019 to address contractors who pay workers “under the table” or misclassify workers as contract labor to avoid paying for overtime, Social Security, workers’ compensation or health care costs. They released their 94-page report to Pittsburgh officials earlier this year.
About 54,000 construction workers live in the Pennsylvania area and the construction industry is one of Pennsylvania’s largest employees, according to a news release from the committee.
The illegal practices of some contractors give them a 30% advantage over contractors that do things legally – in other words, they don’t misclassify workers or use labor brokers, members of the task force told the committee. For example, a contractor that uses a labor broker or misclassifies workers has a $12 million advantage over other bidders on a $100 million contract, according to Joel Niecgorski of the Eastern Atlantic States Regional Council of Carpenters.
“The construction industry is “a well-known haven for companies who misclassify their workers, fail to withhold taxes, ignore laws aimed at ensuring safe job sites and capitalize on worker exploitation. They aid in the erosion of communities by weakening our tax base that helps pay for first responders, school, parks and infrastructure,” said Steve Mazza of the Pittsburgh Building Trades and chair of the task force.
An analysis by the task force estimate that 40 construction workers paid in cash results in a loss of $8,520 a week in uncollected state and local taxes, Niecgorski said.
Some construction companies also use subcontractors who do not have insurance or the proper licenses, they said.
The task force recommendations to the Pittsburgh mayor include:
• Refining the definition of construction contractors to include subcontractors and others
• Strengthening the penalties for labor violations
• Strengthening the regulations on the use of public subsidies
• Creating stronger relationships with municipal judges
• Creating protections for workers who report violations
The committee chair, state Sen. Camera Bartolotta, R-Washington, said the task force recommendations will serve as a guide to state lawmakers as they develop legislation to protect workers and taxpayers.
“We lose so much investment in Pennsylvania already, we can’t afford to keep losing capital investment and money that should be coming in legally,” Bartolotta said. “We are chasing good, hardworking folks out of Pennsylvania because they can’t compete.”