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Conflict Develops between Builders and Government Officials over Labor Labels

07/03/2015

Between several real estate industry groups and the Labor Department, a battle is brewing over the classification of workers. Independent contractors are heavily relied on by home builders and other workers. Now, they have requested the Labor Department to stop awarding grants used to investigate workers who are misclassified as contractors opposed to employees.

Targeting Industry Sectors

Over the past several years, more aggression has been shown by the Labor Department in ensuring companies properly classify workers. In fact, the Department is targeting sectors known for violations and vulnerabilities intensely, this according to a spokesperson. According to officials, misclassification of workers makes it possible for offending companies to avoid paying insurance for unemployment and other benefits.

Included in the targeted sectors are large companies that focus on construction, technology, and transportation, among others. These types of companies commonly classify workers as independent contractors rather than full-time employees because they possess very specialized skills needed for on-demand jobs.

However, regulators for the state and federal government believe classification as independent contractors is actually being done in an effort to avoid paying benefits required for full-time employees or taxes on behalf of full-time workers used to fund unemployment insurance funds.

In 2014, $10 million in annual grants started being awarded by the Labor Department to state regulators so they can put more effort in worker misclassification issues. Some of the grant money is a bonus to states that can prove a reduction in violations by identifying misclassified workers.

Skilled Craftsmen versus Full-Time Employees

A group of trade associations that have a lot of contractors onboard such as the American Trucking Association, American Baker’s Association, and National Association of Home Builders, state that specialized craftsmen are used intermittently or whenever jobs arise. Because of this, independent contractors are hired instead of full-time employees.

For multiple industries, to include real estate, the issue of workers being classified as contractors or employees is big. In fact, many companies feel strongly that the line differentiating the two is unclear. Even though there are a number of factors used to classify a worker, requirements are still too fuzzy.

As stated by Jerry Howard, chief executive of the National Association of Home Builders, forcing small business people to maintain full-time employees on every crew hired for building homes would very quickly force those people completely out of work. This would also drive housing costs to skyrocket, making home building too expensive for most people.

Just last month, top lawmakers were sent a letter in which the group of companies expressed serious concern in how grants are being awarded in an effort to encourage state workers to identify misclassifications when in fact there are none. As part of the letter, the coalition urged Congress to reject the White House Administration’s request for $10 million in grants for next year.

In response, a spokesman for the Labor Department said the grant money would be used primarily for hiring more staff needed to conduct company audits, determine the companies that should be warranted, for educational programs, better technology, and on teaching employers how to correctly classify workers.

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