Construction Industry Fraud Needs to be Exposed

Steve Pinkley
April 17, 2024|


There’s a secretive underbelly of the construction industry that few people know about and it is getting far too little attention or action.

Small, often out-of-state contractors, are ripping off workers, avoiding taxes and wreaking havoc for legitimate companies trying to make a living in a tough business, where one or two jobs can mean the difference between staying afloat or going under. By misclassifying their employees as “independent contractors,” these fraudulent players cut down on costs and avoid the kind of taxes and other expenses everyone else is paying.

Economists estimate more than 20 percent of construction workers in Missouri are victims of this misclassification scheme. They’re working six or seven days a week with no overtime pay, benefits or health coverage, and they get their money in cash (sometimes through Venmo or gift cards) at a rate well below what a construction worker should be getting paid.

With these artificially low expenses, the shady contractor can easily underbid established, reputable construction companies that are playing by the rules and paying honest wages, taxes and other costs that go into running a business. Law-abiding companies work hard to pay their people well and provide employee benefits but they can’t compete and successfully bid on jobs if they are up against cheats who scam the system.

Immigrants, both documented and undocumented, are especially vulnerable, making up a large percentage of victimized workers. They may not speak English as a first language, or understand U.S. labor laws, and fear of deportation keeps many silent. We also know that the fraudulent contractors cut corners on job site safety with little regard for their workers’ well-being.

The Mid-America Carpenters Union has been working to stop the illegal practices running rampant in our industry. With cooperation from local and state elected officials, we’ve been able to get this issue in front of policymakers interested in helping us strengthen our employment laws, create government investigative units and make it easier to blow the whistle on the scammers. Law enforcement needs to be given the tools and leadership to do their jobs, and contractors need to clean up their act. We play by the rules and so should they.

A report by the University of California Berkeley Labor Center found that 39 percent of construction worker families nationwide are forced to enroll in one or more safety net programs to make ends meet. The yearly cost to state and federal governments is a staggering $28 billion. Researchers attribute their findings to low pay, wage theft and illegal employment practices in the construction industry.

This is an outrage. Construction is not a minimum wage job. The men and women working in this profession undergo years of training, study OSHA safety, and they make darn good money. There is no excuse for any construction professionals having to rely on food stamps or other assistance programs to get by.

As taxpayers, all of us are getting ripped off as well. In the U.S., the crisis has reached epidemic proportions, costing public coffers billions of dollars every year, money that could be used for schools, better roads, public safety and government services.

These shady contractors are operating every day on construction sites around the St. Louis area. We have spoken to workers who have told us appalling stories of having to put in 14-hour days, getting paid under the table, working in unsafe conditions and receiving zero health insurance or other employment benefits.

Sadly, over decades, this has become a common practice in construction. It’s not an anomaly but rather an actual business model for many unscrupulous companies that can only profit by cheating. It is something everyone in our industry should pay closer attention to and expose wherever we see it happening.

Steve Pinkley is the St. Louis Regional Director for the Mid-America Carpenters Regional Council.


About the Author: Steve Pinkley

Steve Pinkley

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