Statewide, Iowa – A new report suggests up to 10 percent of Iowa construction workers have been underpaid because they’ve been incorrectly identified as independent contractors rather than employees.
Sean Finn, who authored the report for Common Good Iowa, says that “misclassification” is against the law.
About five percent of employed Iowans work in the construction industry. While the majority of them earn good wages and benefits, Finn says the report shows there’s an underground economy emerging.
Finn says billions of dollars will be flooding into the state in the next decade due to federal programs, but the very complicated web of general contractors and subcontractors will make it difficult to hold bad actors accountable.
Finn adds illegally classifying someone as an independent contractor saves a business about $6,000 annually in fringe benefits and another $6,000 in Social Security and Medicare taxes. They’re also ineligible for unemployment benefits if they’re laid off.
Common Good Iowa is recommending that Iowa legislators update the state’s wage payment collection law and hire more people to enforce the law.
Finn says more staff could not only investigate businesses trying to evade labor laws and taxes, but they could educate Iowa employers who want to do business the right way, but are unaware of the law. A 2022 report from Common Good Iowa indicated Iowa workers lost $900 million dollars in wages in 2022 due to fraud.
