A stated crackdown on misclassification of workers is long overdue.
By: Richard E. Tolson
State legislators recently announced that legalizing marijuana will be decided by voters in a 2020 referendum, leaving a $60 million hole in the state budget proposal Gov. Phil Murphy released earlier this year.
Despite that setback, there is another, less controversial, step state officials can take to collect tens of millions of dollars in revenue: stop wealthy developers from taking advantage of labor laws and outdated regulation and enforcement to increase profit margins by abusing workers.
This issue does not get the attention that marijuana legalization receives, but it is also a matter of social justice and a test of the state government’s desire to tackle structural inequalities. It also has the capacity to help fill the state’s coffers, as a new report from the William J. Hughes Center for Public Policy at Stockton University estimates up to $1 billion in illegal construction activity is occurring in our state annually.
Quietly but pervasively, multi-millionaires across the state are using middlemen to break state and federal laws by misclassifying full-time workers as contractors – denying them the basic benefits and rights like healthcare, committing wage theft by paying below the required living wage, establishing illegal work weeks, paying cash and evading taxes – all to increase already record profits from property sales and record residential rents, which have reached an 11-year high.
The tricks add up. The new study by Stockton University conservatively estimated that the developers are robbing tens of thousands of working men and women, keeping them off-the-books or illegally misclassifying them to further enrich themselves. An entire underground economy has been allowed to grow, built on the abuse of workers, for the benefit of multi-millionaires.
To be sure, many developers are decent employers and treat their people fairly and with dignity. But there are still too many that do not. Their behavior is disgusting and it’s long past time to do something about it.
With a new governor, New Jersey is finally beginning to crack down. Gov. Murphy signed an executive order last year creating a task force on the issue, and three subsequent public meetings revealed ample evidence of widespread abuse. Last summer, the Hudson County Board of Freeholders passed a resolution decrying these practices as “not only unconscionable, but illegal.”
These moves represent progress, but more action is required. To put it in football terms, the state needs to go on an 80-yard drive, and they just threw a three-yard pass.
Right now, in Hudson County alone, there are more than a dozen major, major development sites using this illegal business model and cheating workers. And it’s happening across the state as well. There is more we can do to create basic fairness and economic justice and collect all of the tax revenue the state is owed.
Large development and construction companies view the paltry fines the state currently levies as an acceptable cost of doing business, so on the rare occasion they are caught, these abusive actors are comfortable with paying the fines and continuing to cheat workers and taxpayers. These are barnacles on a whale—minor inconveniences. Not only is the state missing out on a good deal of revenue, the current scheme creates no deterrent for bad actors in the industry
The Department of Labor & Workforce Development has recently been given additional tools to take a stronger approach to penalties and license suspensions to protect working men and women. These resources include more investigative and enforcement staff and increased penalties for violations. And the Governor will soon have an opportunity to sign a bill empowering the Department of Labor to issue more Stop-Work-Orders against developers who are unmoved by fines.
All of this progress is a result of the Governor’s Task Force on Employee Classification, which has brought together the Departments of Labor, Treasury, and Banking and Insurance as well as the Attorney General’s Office and other Cabinet-level positions.
After years of seeing elected officials at the highest level turn away from the issue of employee misclassification, we are glad to see the beginnings of leadership from Trenton. For the sake of blue-collar workers across the state – and for the sake of New Jersey’s reputation on civil rights and protecting taxpayers – that action must continue and become even more aggressive.
Richard E. Tolson is Director of International Union of Bricklayers and Allied Craftworkers Administrative District Council of New Jersey, Locals 4 & 5, which represents craftworkers in the masonry trades across the state.