Misclassification costs the New York construction industry. We have to fix it

In the cutthroat competition of the construction industry, the relationship between employers and workers can be difficult to navigate. Something as simple as how you classify a worker can have a lasting impact for all involved. Misclassification — where contractors erroneously label employees as “independent contractors” — is a growing problem in the industry that has far-reaching consequences. This practice not only robs workers of their rights and protections but also undermines the very foundation of a fair and competitive industry.

Misclassification primarily occurs when employers intentionally mislabel workers as independent contractors to evade labor laws and avoid paying benefits, taxes and insurance. While this may appear to benefit employers in the short term, the long-term consequences are dire. Honest contractors who comply with labor laws are put at a significant disadvantage, facing unfair competition from those who engage in misclassification. This imbalance disrupts the market, adversely affecting the livelihood of workers as well as law-abiding contractors.

As a former union carpenter who started my own construction company, I’ve seen the issue from both perspectives. A worker who needs a paycheck is going to feel pressure to go along with what the boss says, even if it means no access to benefits or insurance. A contractor competing with other firms that cut corners is going to feel pressure to keep costs down, even if it means breaking the law.

Construction going at Hamilton Green, the site of the former White Plains Mall Sept. 27, 2023. The residential project will include four mixed-income multifamily buildings totaling 860 rental units, including 78 on-site affordable units, open space, underground parking, as well as dining, retail and commercial space. This is one of several new construction projects going on in White Plains.

That last point is key. Misclassification is technically against the law. I say “technically” because it’s rare that law enforcement dedicates the resources necessary to investigate this crime. That has to change — because misclassification is a crime. The victims are the exploited workers, honest contractors and every law-abiding taxpayer forced to pick up the slack for these deadbeats.

It’s time for district attorneys across New York State to step up and do the job needed to level the playing field in the construction industry — including right here in Westchester County.

Think about it. If a bunch of thieves were creeping through construction sites, stealing cash out of the boss’s office, law enforcement would take action. Undercover investigators might pose as construction workers to catch them in the act, and there’d be no hesitation in prosecuting the offenders. But when a shady contractor cuts corners and cheats his workers out of pay and benefits, where is the prosecutor? That contractor is picking pockets and cheating on his taxes, but it’s rare to see those laws enforced with the same focus as common theft.

I had been a union carpenter for about 10 years before I started my company in 1992. My experience has shown me the value in hiring a pool of talented workers, with the proper training, to do a quality job — and paying them what they deserve. Not every firm operates like that, so contractors like me are forced to bid against companies that don’t pay their workers a living wage, skimp on benefits and cut corners. The cheats have an unfair advantage and they need to be held accountable.

More perspective: Our infrastructure — in NY, NJ and across America — is a national embarrassment

That’s how misclassification harms honest contractors. Employers who classify workers as independent contractors avoid paying employment taxes, workers' compensation insurance and unemployment insurance. The cost of liability and umbrella insurance is no small issue to a small business like mine. When I bid on a project, I have to include insurance cost and coverage as part of the hourly labor cost to ensure that everyone is protected — and that makes it hard to compete against contractors who don’t take steps to protect their workers. As a result, honest contractors often find themselves unable to compete on price, even though their higher costs are essential for providing proper employee benefits and maintaining legal compliance.

Misclassification in the construction industry is no administrative, paperwork error. It is a corrosive business practice that harms honest contractors, workers, and the industry as a whole. By artificially lowering labor costs and sidestepping legal obligations, misclassification creates an uneven playing field, disadvantages law-abiding contractors and jeopardizes the safety and rights of workers. Addressing this issue requires a concerted effort from policymakers and district attorneys to enforce existing labor laws, promote fair competition and protect the interests of honest contractors. Only through these efforts can we ensure a construction industry that thrives on integrity, fairness and the well-being of all those who contribute to its success.

Mike Kane operates Kane Contracting in Peekskill, New York.

This article originally appeared on NorthJersey.com: NY construction industry misclassifcation problems should be fixed