Tax fraud is an illegal business practice commonplace in the service industries, disproportionately affecting construction and hotel workers. Rather than retain and pay workers as employees, which requires the payment of payroll taxes, unemployment insurance, and workers’ compensation, unscrupulous employers illegally classify their workers as independent contractors. This deprives workers of basic services that they may need in the event of injury or public services later in life, like Social Security.
On Monday, the Carpenters Local Union 330 held a State House rally to call attention to this practice.
“Just so everybody’s clear what this tax fraud is. It’s the cash payments; it’s the misclassification… that we all know goes on in the construction industry but it’s a dirty little secret. And unless we talk about it people aren’t going to understand and they’re just going to turn a blind eye to it,” said Derek Adamiec, President of Carpenters Local Union 330. “It hurts your kids because your schools don’t get funded. It hurts your families, because there’s not enough money in Medicare for your sick mom or your sick dad. It hurts carpenters who are out there working for cash because they ain’t got worker’s comp, because they’re just a ghost in the industry. And it hurts our union contractors, because they start off at a 30 percent disadvantage because somebody’s paying cash…”
One particular offender is Callahan Construction, said Adamiec. “They’re probably one of the biggest culprits to this. We want this to be a big event here in Providence so the City knows what’s going on.”
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“This illegal practice is costing the State of Rhode Island up to $49 million a year in unpaid taxes,” said Rhode Island Secretary of State Nellie Gorbea. “Every time you hear about issues with the budget, think about that. That is money that is being taken away from all of us.”
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“What they do is, hire people as a ‘contractor’ without paying any benefits – not paying payroll taxes, not paying into disability,” said Providence City Council President Sabina Matos describing tax fraudsters. “So when a worker gets hurt, it’s all on them. He doesn’t have the protection of a medical leave. Doesn’t have the protection of a union.”
“I am very proud to join you today in calling out the crime of tax fraud and fighting back against the exploitation and wage theft that goes against everything we believe in as supporters of the labor movement, as Rhode Islanders and as Americans,” said former State Representative Aaron Regunberg. “That idea that a fair day’s work deserves a fair day’s pay.”
“We’ve got a couple of projects that have gone up and the workers have not been treated right,” said Rhode Island State Senator Samuel Bell (Democrat, District 5, Providence). “If you step a little outside my district there’s a big mill renovation where there have been some serious environmental problems. The workers were not given adequate rights, the work quality was shoddy, and the people who live there suffer for it.”
“There is nothing more valuable and more important to our nation’s economy than what we all do – mostly what you do – which is work hard and add value to all of the various parts of Rhode Island’s economy,” said Scott Jenson, director of the Rhode Island Department of Labor and Training. “You can’t have an efficient, strong, healthy economy without a strong labor market.”
“When they do the wrong thing, when they engage in this tax theft by paying people under the table and doing everything off the books, they’re hurting you, they’re hurting the people that they are paying, who are not going to be able to get benefits one day when they need that social security, when they need that worker’s comp or whatever else,” said Rhode Island State Treasurer Seth Magaziner. “And they’re also hurting us because we’re not going to have enough money to pay for things like the school construction program.”
“This is something that… we see every day,” said Carpenters Union Local 330 Lead Organizer Ernesto Belo. “We go onto a job site [we see] individuals who don’t know who they’re working for, who’s paying them, they’re being paid cash, they’re working 60 hours a week, they’re being paid straight time for it. This is horrendous. This is America. This shouldn’t be happening in our country.”
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