On Tuesday, January 9, the United States Department of Labor (DOL) issued its final rule to help workers and employers better understand how to analyze who is an employee or independent contractor under the Fair Labor Standards Act (FLSA). This rule, which went into effect March 11, 2024, makes it harder for companies to misclassify workers, expanding access to employee protections such as overtime pay, Social Security benefits and more.
“Unions like SMART have long fought against the sordid practice of worker misclassification in the construction industry, where bad-faith companies categorize their workers as independent contractors in order to deprive them of the protections, benefits and pay they deserve — including minimum wage, overtime pay and workers’ compensation,” said SMART General President Michael Coleman on the day the rule was issued. “This anti-worker practice has been particularly harmful to immigrants and members of underrepresented communities. The final rule issued by the DOL today will protect tens of thousands of workers across the country, and all of us at SMART applaud Acting Labor Secretary Julie Su and the Biden administration for taking action.”
Watch to learn more about SMART local unions’ efforts to combat worker misclassification.
On Tuesday, January 9, the United States Department of Labor (DOL) issued its final rule to help workers and employers better understand how to analyze who is an employee or independent contractor under the Fair Labor Standards Act (FLSA). This rule will make it harder for companies to misclassify workers, expanding access to employee protections such as overtime pay, Social Security benefits and more. In response, SMART issued the following statement:
“Unions like SMART have long fought against the sordid practice of worker misclassification in the construction industry, where bad-faith companies categorize their workers as independent contractors in order to deprive them of the protections, benefits and pay they deserve – including minimum wage, overtime pay and workers’ compensation. This anti-worker practice has been particularly harmful to immigrants and members of underrepresented communities. The final rule issued by the DOL today will protect tens of thousands of workers across the country, and all of us at SMART applaud Acting Labor Secretary Julie Su and the Biden administration for taking action.”
Wage theft and worker misclassification are forms of exploitation that litter the construction industry, where unscrupulous employers take advantage of employees to pay them less than what they are owed. A recent Economic Policy Institute (EPI) study found that construction workers lose out on as much as $16,729 per year in income and job benefits; the EPI also reported that wage theft costs American workers as much as $50 billion per year — more than annual robberies, burglaries and motor vehicle thefts combined.
SMART locals are fighting against such practices from coast to coast – helping workers win the pay that they deserve.
Watch coverage of victories against wage theft and worker misclassification by SMART local unions.
“Wage theft is occurring everywhere in the construction industry, and employers will take advantage of those people who may not know what their rights are or have any idea of what prevailing wages are,” SMART Local 16 (Portland, Oregon) Business Manager Brian Noble explained in a recent episode of SMART News. “That’s who they prey on.”
SMART Local 16 has filed 10 prevailing wage complaints against 360 Sheet Metal, an aggressively anti-union contractor in Vancouver, Washington, whose workers previously went on strike after joining Local 16. The company was paying workers $12 to $15 an hour for fabricating duct in its shop, at a time when the prevailing wage (which applies to fabrication of ductwork in the state) was more than $65 an hour.
The Washington Department of Labor & Industries has resolved four of the 10 complaints so far.
“In those four cases,” Noble said, “they found that [the owner of 360 Sheet Metal] owed over $200,000 in back wages to 20 workers, and they assessed $115,000 in penalties for failing to pay prevailing wage in the shop.”
In Virginia, meanwhile, SMART Local 100 filed a complaint with the U.S. Department of Labor (DOL) alleging that a nonunion contractor on the Potomac Yards Metro Station project had misclassified sheet metal workers performing metal roofing work on the station. This resulted in them being paid approximately 60% less than the prevailing wage – hurting those workers and taking work away from Local 100.
“Misclassification is pretty rampant across the country,” explained Local 100 Marketing Director Chuck Sewell to SMART News. “Our contractors have to abide by certain rules, they have to pay certain rates, they know what the rates are, so that’s how they bid the projects. If you have these low-wage contractors come in and undercut everybody and get the project, it takes work hours from the local.”
The DOL investigation, which ended in the fall of 2022, found that the employees in question were, in fact, misclassified, resulting in more than $288,000 in back wages being recovered for eight workers.
Such wins against wage theft and worker misclassifications are critical for employees, ensuring that they are fairly compensated for their labor. They also demonstrate the crucial role unions play in representing all workers, including those who have yet to be organized.
“It’s important that we make sure all workers are represented and get what they deserve,” Noble concluded. “[It’s vital] that we stop these employers from undercutting our contractors and the industry, and most importantly, that these underrepresented workers are getting what’s truly owed to them.”
A new analysis by the Economic Policy Institute (EPI) estimates that misclassified construction workers lose out on as much as $16,729 per year in income and job benefits compared with what they would have earned as employees. The study, which broadly focuses on worker misclassification across multiple industries, not only demonstrates the economic cost faced by workers when their employer denies their basic rights on the job; it also reaffirms the need for Congress to pass pro-worker laws like the Protecting the Right to Organize (PRO) Act.
Worker misclassification is one of the more common ways bad-faith employers deprive workers of their rights and fair compensation. By incorrectly classifying an employee as an independent contractor, employers deprive workers of, among other things:
Overtime wage and hour protections;
The right to earn a minimum wage;
Eligibility to participate in state and federal unemployment insurance systems or qualify for workers’ compensation insurance;
National Labor Relations Act protections that guarantee workers’ rights to form a union and bargain collectively for better pay and benefits.
The EPI study analyzed the 11 professions most likely to be misclassified by employers, including home health aides, landscapers, truck drivers, janitors and nail salon workers. (Notably, the analysis pointed out, “people of color and immigrant workers are more likely to be in occupations where misclassification is common.”) For construction workers, the disparities for misclassified workers — especially when compared to the wages and benefits negotiated in a union contract — could mean the difference between a family-sustaining career and living paycheck to paycheck.
The devastating effects of worker misclassification demonstrate how important it is that SMART members and locals work to bring unorganized workers into the union.
“According to our calculations, illegal misclassification costs the typical construction worker between $10,177 and $16,729 per year,” the EPI wrote in its study. “These estimates are both conservative because we have not attempted to place a monetary value on the worker’s loss, when misclassified as an independent contractor, of rights guaranteed by the National Labor Relations Act, including the possibility of union representation.”
The EPI added: “Policymakers should establish or expand the use of a strong, uniform protective legal test for determining employee status and pass the Protecting the Right to Organize (PRO) Act, which would make it harder for employers to misclassify employees in order to prevent them from forming a union and bargaining collectively.”
The devastating effects of worker misclassification demonstrate how important it is that SMART members and locals work to bring unorganized workers into the union.
“Contractors who misclassify their employees aren’t just depriving those workers of pay, benefits and protections; they are actively bringing down the wages and working conditions in local areas, and exploiting working families in order to strengthen their market share — taking jobs from SMART members in the process,” said SMART General President Joseph Sellers. “By fighting against misclassification and bringing those workers into SMART, we lift all workers up — including our current and future members.”
A new analysis by the Economic Policy Institute (EPI) estimates that misclassified construction workers lose out on as much as $16,729 per year in income and job benefits compared with what they would have earned as employees. The study, which broadly focuses on worker misclassification across multiple industries, not only demonstrates the economic cost faced by workers when their employer denies their basic rights on the job; it also reaffirms the need for the United States Congress to pass pro-worker laws like the Protecting the Right to Organize (PRO) Act.
Worker misclassification is one of the more common ways bad-faith employers deprive workers of their rights and fair compensation. By incorrectly classifying an employee as an independent contractor, employers deprive workers of, among other things:
Overtime wage and hour protections;
The right to earn a minimum wage;
Eligibility to participate in state and federal unemployment insurance systems or qualify for workers’ compensation insurance;
National Labor Relations Act protections that guarantee workers’ rights to form a union and bargain collectively for better pay and benefits.
“Contractors who misclassify their employees aren’t just depriving those workers of pay, benefits and protections; they are actively bringing down the wages and working conditions in local areas, and exploiting working families in order to strengthen their market share – taking jobs from SMART members in the process.”
The EPI study analyzed the 11 professions most likely to be misclassified by employers, including home health aides, landscapers, truck drivers, janitors and nail salon workers. (Notably, the analysis pointed out, “people of color and immigrant workers are more likely to be in occupations where misclassification is common.”) For construction workers, the disparities for misclassified workers – especially when compared to the wages and benefits negotiated in a union contract – could mean the difference between a family-sustaining career and living paycheck to paycheck.
“According to our calculations, illegal misclassification costs the typical construction worker between $10,177 and $16,729 per year,” the EPI wrote in its study. “These estimates are both conservative because we have not attempted to place a monetary value on the worker’s loss, when misclassified as an independent contractor, of rights guaranteed by the National Labor Relations Act, including the possibility of union representation.”
The EPI added: “Policymakers should establish or expand the use of a strong, uniform protective legal test for determining employee status and pass the Protecting the Right to Organize (PRO) Act, which would make it harder for employers to misclassify employees in order to prevent them from forming a union and bargaining collectively.”
The devastating effects of worker misclassification demonstrate how important it is that SMART members and locals work to bring unorganized workers into the union.
“Contractors who misclassify their employees aren’t just depriving those workers of pay, benefits and protections; they are actively bringing down the wages and working conditions in local areas, and exploiting working families in order to strengthen their market share – taking jobs from SMART members in the process,” said SMART General President Joseph Sellers. “By fighting against misclassification and bringing those workers into SMART, we lift all workers up – including our current and future members.”
