Dive Brief:

• New York State Attorney General Barbara Underwood and Michael Nestor, the general inspector for the Port Authority of New York and New Jersey, jointly announced the arrest of Paterson, New Jersey-based LaGuardia Airport asbestos removal contractor Marjan Kasapinov for allegedly failing to pay prevailing wage rates and benefits of $40,000 and filing false payroll records that concealed the underpayments. Kasapinov and his company Emlo Corp. face felony charges of failure to pay the prevailing rate of wage or supplements, offering a false instrument for filing in the first degree and failure to secure workers' compensation insurance, despite the hazardous nature of asbestos-handlig.
• Authorities allege that during the time Kasapinov and Emlo performed asbestos removal work on several buildings at LaGuardia between March 2014 and March 2015, the contractor submitted doctored certified payroll reports stating that his employees had been paid the appropriate prevailing wages and benefits, although he actually underpaid 28 workers. Prosecutors also claim that Kasapinov and Emlo did not obtain the required workers' compensation insurance coverage. The charges have no connection to the $4 billion LaGuardia Central B Terminal project now underway.
• Kasapinov and Emlo have pleaded not guilty. If convicted, Kasapinov could be sentenced to as many as four years in prison. He would also have to make restitution to the underpaid employees and would be barred from performing public work for five years.

Dive Insight:

Authorities from New York to California are coming down hard on contractors who intentionally short their employees on pay and benefits. Those are obvious acts of wage theft, but some other practices — such as misclassifying those who really should be treated as employees as independent contractors — are harder to root out because in some areas of the country and in some trades it's a fairly common practice. In those instances, workers might not even realize that they're not being paid fairly or even legally, so they are unlikely to report it to local authorities.

As long as even a few firms in some markets are using illegitimate independent contractors, however, it would be difficult to eliminate improper use altogether. For contractors in tough competition for projects — often awarded to the low bidder — dropping the practice would mean pricing themselves out of work if they had to pay employment taxes, workers' compensation and other benefits to all their workers.

There are, of course, ethical independent contractors working in the business and providing a valuable service on construction projects. In order to preserve construction employers' relationships with legitimate independent contractors, the Associated General Contractors of America has suggested simplification of the complex definition of an independent contractor used by the Internal Revenue Service and other agencies.

The AGC also promotes clarification of the Safe Harbor rule that prevents the IRS from going after contractors for employee back taxes if they had a reasonable basis for classifying a worker as an independent contractor.