Thread: Industry leaders want Legislature to fight ‘payroll fraud'

Industry leaders want Lege to fight ‘payroll fraud'

Texas Tribune

Friday, September 14, 2012

Tycoons in commercial construction and home building — industries often pegged as harbors for undocumented workers — are pushing back against some of their own, urging state lawmakers to close a loophole that guards employers against knowingly hiring illegal immigrants.

Stan Marek, the president and CEO of the Marek Family of Companies, an interior contracting company with offices statewide, said his industry is rife with contractors who purposely classify employees as subcontractors, or “1099” employees, a term gleaned from the employment form they fill out. Employers use this subcontractor classification to avoid paying payroll taxes, workers' compensation and overtime, Marek said, but also to avoid knowing their workers' legal status.

Since 2006, Immigrations and Customs Enforcement has ramped up its inspections of I-9 forms, the federal employment eligibility verification. The popular misconception is that ICE deports workers the agency finds are ineligible to work in the U.S., but Marek said that's not always the case. Many of these terminated workers go into the “underground economy,” he said, working for employers who will classify them as independent contractors.

The end result? Workers who used to be paid hourly wages and taxed on their income now are being paid cash and not contributing to tax rolls, Marek said.

“That, to me, is payroll fraud,” he said. “You have what is called a safe harbor. And that has not been tested in the courts in a long time, and everybody sort of sticks their heads in the sand and ignores it.”

Marek is part of a group of Texas Republicans who were instrumental in convincing the state party to adopt a more immigrant-friendly platform at its recent convention in Fort Worth. The “Texas solution” for immigration reform includes a secure border, alternatives to mass deportations and a national guest worker program.

But more also can be done at the state level, the group says. Marek and his colleagues will lobby the state Legislature to convince lawmakers to give the Texas Workforce Commission additional resources to aid in detecting what they consider to be payroll fraud. They argue that if the commission is granted an increase in resources for this task, it will mean a massive return on investment in the form of tax dollars paid by employers.

Marek isn't alone in this thinking. The liberal Center for American Progress recently issued a report suggesting that legalizing undocumented workers would be a major boon to the state economy — to the tune of about $4.1 billion in annual tax revenue.

Other groups are less convinced. Numbers USA, a group that seeks to reduce legal and illegal immigration, says U.S. citizens should be the first priority. In 2011, the group notes, 1.5 million people aged 25 or younger with bachelor's degrees were unemployed or underemployed.
Marek said he has spoken with some state lawmakers who seemed amenable to the legislation. But he acknowledges that it won't be an easy sell.

“We'll probably push just on the commercial side because we'd get tremendous pushback from the home building industry and the apartment association,” he said.
: Industry leaders want Lege to fight

"The liberal Center for American Progress recently issued a report suggesting that legalizing undocumented workers would be a major boon to the state economy — to the tune of about $4.1 billion in annual tax revenue."

And that is helping the millions of un-employed how?