How is Payroll Fraud Infecting the Industry?

Payroll fraud is on the rise and is infecting the industry by stealing from honest contractors, depriving UBC members from work and lowering market share. Dishonest contractors utilize payroll fraud to exploit their workers and misclassify them for profit.

How Does Payroll Fraud Affect You?

Dishonest contractors that participate in payroll fraud are stealing by defrauding social security taxes, workers compensation and other employee protections and benefits. Individuals that use payroll fraud are stealing money from the state, provincial and federal government, affecting the budget to build government funded projects. Payroll schemes are directly responsible for a loss of work hours and eroding the labor union market share.

Honest contractors can’t compete with cheating contractors because they underbid their labor costs by 30-40%. Since the normal markup on a job is only 10-15%, the good guys are left with zero profit.

What Are They Doing to Put a Stop to Payroll Fraud?

The strategy to combat payroll fraud is: education, legislation and enforcement. Tougher laws are being promoted by UBC and implemented throughout the U.S to help prevent payroll fraud. In addition to making law enforcement agencies aware of cheating contractors and payroll schemes, the UBC is deploying their resource management program, which allows them to track contractors that might be participating in exploitation and payroll fraud.

The Steve Nagy and S & S Assemblies Case:

The Steve Nagy and S & S Assemblies case first came to the attention of the Pacific Northwest Regional Council of Carpenters, when union and non-union contractors were complaining that they couldn’t compete with Nagy. After investigating deeper, they found that he was stealing millions of dollars through tax avoidance and rigging every step of the bidding process. Both parties were prosecuted in state court for antitrust violations, racketeering and tax evasion; resulting in federal prison. Without the evidence derived from the association with the Carpenters Union, Nagy never would have been caught.

How do we stop Dishonest Contractors?

We must build forces with contractors, government, law enforcement and other stakeholders in the valley to help prevent payroll fraud, so honest contractors will be more profitable.