40% of Construction Workers Intentionally Misclassified as "Subcontractors"
Dallas work injury attorney Michael Grossman offers a clarification to a recent article regarding the ill effects of the large scale misclassification of Texas construction workers. Read the original article.
According to a recent study by the University of Texas, as many as 40% of Texas construction workers are intentionally misclassified as contract laborers rather than employees, providing construction companies with an opportunity to deny workers' compensation benefits to injured employees.
Cause For Concern – Workers are Suffering and the Responsible Parties Can Use a Loophole to Avoid Responsibility
The matter at hand is one of grave concern to anyone who puts their well-being on the line in the construction industry, yet it should also be an issue that we, as responsible citizens of the State of Texas, must strive to remedy. Men and women working in the construction industry literally shape our world and their labor is a significant driving force of our economy. We owe them fair treatment yet a loophole in our current laws allow for such fairness to prove elusive.
According to the Labor Code, the rights that an injured worker has to seek redress for a work-related injury are defined statutorily based on his or her status as an employee. Of key significance, workers who are as hired as "contract laborers" are, for all intents and purposes, considered to be their own company and not an employee. As such, those who hire independent contractors owe them a considerably lesser duty than they owe to employees.
Why Are Independent Contractors Owed a Lesser Duty?
The idea behind these laws is seemingly innocent enough. A subcontractor or independent contractor is someone who marches to the beat of their own occupational drum, and various consumers or general contractors choose to employ them on a case-by-case basis. I'll use myself and my personal experiences to highlight the application of the relevant law.
If my house needs drywall repair, I hire a contractor to make that repair and then we part ways. He is not my employee, nor I his employer, and the law states that I do not owe him a right to compensation for injuries the same way that I would if he were an employee. The law works this way to keep purveyors of contract labor from being unfairly burdened by lawsuits stemming from injuries related to events that they exercise no control over. This makes perfect sense.
On the contrary, an employee is someone who works for me on an ongoing basis. I inspect an employee's work product, I provide him with equipment, tools, or training, and I exercise a great deal of control of his work activities. Since he works for me for the purpose of growing my business (read: making profit for me), the law makes it quite clear that I am responsible for providing him with a safe work environment. I'm not held liable for everything that happens to him (for instance, if he is injured while horse playing or under the influence of drugs, or if he deliberately injures himself, I am not liable), but I am held responsible for any harm he sustains that is reasonably within my power to avoid. There are about 15 employees whom I am responsible for at my law firm, and the law allows for a clear distinction between such employees and the drywall repairman I spoke of earlier. This too makes perfect sense.
Misappropriating the Term "Contractor"
The problem is that it's common practice in the construction industry to hire employees and then simply refer to them as contractors. Construction companies treat these workers like employees in every way; they tell them when to come to work, how to work, they provide them with tools and training, etc. Yet, they are paid as subcontractors and are classified as such. Of course, this provides the construction company with the best of both worlds. They can reap all of the benefits of having an employee yet they can avoid all of the responsibility when something goes wrong.
If an employee is injured due to the employer's negligence, the construction company may face lawsuits, an increase in their workers' compensation premiums, or fines from OSHA. Such "penalties" make perfect sense. But if an independent contractor is injured, the construction company has little to be concerned about. Thus, with the stroke of a pen, employees are deliberately misclassified as contractors, they're stripped of their rights, and employers are able to misappropriate the aforementioned laws for their own gain.
The Big-Picture Problem – Circumventing The Purpose of Injury Laws
The real problem is that such a lack of accountability provides no incentive for construction companies to engage in common safety practices. The whole idea behind the various Texas personal injury laws that affect our lives is to disincentivize reckless behavior. When I drive my car I do so in a safe manner for two reasons. The first is that I strive to be a good person, and a big part of that is not inflicting harm upon an innocent person. The second reason is that I stand to be penalized if I do inflict such harm. Since not every citizen of Texas is burdened by my first motivator, the second proves to be universally effective in curbing reckless desires, or at least in providing a remedy to those who are victimized in the absence of better judgment.
But when a construction company can exploit a law that makes them bulletproof, what incentive do they have to spend the money necessary to provide a safe work environment?
Insult to Injury
The part that I find most troubling is that Texas law is already very favorable to construction companies; perhaps too favorable. Notwithstanding the issue at hand in this discussion, if a Texas construction company elects to buy into the state-run workers' compensation program, they are effectively provided with a shield against almost every type of injury-related lawsuit that could feasibly come their way. Barring lawsuits stemming from fatalities caused by the employer's gross negligence, all incidents of injury or death that result from the employer's ordinary negligence are remedied in the form of workers' compensation benefits being paid to the employee or their surviving family members.
In other words, when the employer buys workers' comp coverage (rather than opting out and becoming a "non-subscriber"), the employee is forbidden from filing a lawsuit and is only eligible to receive fairly paltry benefits, thus saving the construction company untold sums of money.
You would think that construction companies would find this to be good enough. They pay their workers' comp premiums, the injured worker gets some de minimis benefits and has their medical bills paid for by the workers' comp carrier, and the construction company is protected from a lawsuit. No one has to go to court and the construction company avoids any significant financial liabilities. I think that most reasonable people would agree that this is more than fair to construction companies.
But by classifying an honest-to-goodness employee as an independent contractor, construction companies are able to rob the employee of these workers comp benefits. The best that the employee can hope for is to hire a construction work injury lawyer in Dallas and dispute their status as an employee. Again though, at best they receive is a fairly limited benefits package in the best case scenario, so they are essentially forced to fight an expensive legal battle just to recover already limited compensation.
In my judgment, the solution to this problem is simple. We must amend the Texas Workers' Compensation Act to either allow a misclassified employee to seek damages for the unfair denial of workers' compensation benefits when such underhanded tactics are used by the employer, or we must expand the definition of "employee" within the context of the Texas Workers' Compensation Act to provide ordinary benefits to contract laborers who meet the appropriate criteria.
In the absence of a remedy to these underhanded tactics, we can expect nothing short of an increased burden on the general public. After all, when a worker is injured and denied access to benefits that they are perfectly entitled to, they don't simply vanish into thin air. They just cease to be the construction company's problem as they transition to becoming our problem through their dependency on subsidized healthcare and disability benefits, courtesy of the tax payer.