Shady construction contractors in Burnaby are underreporting income or deliberately misclassifying their workers as independent to evade tax and employment fees.
That’s according to the BC Building Trades (BCBT) in a damning report release Tuesday that says this practice overall in B.C. adds up to a lot of money in lost revenue.
“That’s $308 million that isn’t going into schools and hospitals, it isn’t going into supporting injured workers, and it isn’t supporting public services. Instead, it’s going directly into the pockets of unscrupulous contractors and robbing legitimate contractors of an honest income,” said Brynn Bourke, executive director of the BCBT.
BCBT commissioned Prism Economics and Analysis to collect and analyze publicly available data from WorkSafeBC, Statistics Canada and BuildForce Canada. Statistics Canada has identified the B.C. construction sector leading the country in underground economic activity. The Prism report finds some of the losses at $308 million in unpaid income tax, unpaid Employment Insurance and Canada Pension Plan contributions and unpaid workers compensation premiums.
“Legitimate, responsible contractors and the wider taxpaying public have to make up the difference,” says Bourke. “Meanwhile the workers who are misclassified lose out on what they should be entitled to under the Employment Standards Act, such as overtime, holidays, sick leave and vacation pay.”
While the underground or “shadow” economy includes small-scale repair and renovation work that is unreported and paid for in cash, the bigger and more prevalent problem is the misclassification of workers. Unscrupulous contractors who misclassify workers as independent contractors enjoy an illegitimate savings on labour costs of about 20 per cent, which disadvantages the honest contractors who follow the rules.
“The misclassification of workers in B.C. is rampant and it has far-reaching consequences for every citizen of this province,” says Dan Jajic, business manager of the International Union of Painters and Allied Trades District Council 38 (IUPAT DC38).
IUPAT DC38 represents painters, glaziers, drywall finishers and wall and ceiling installers. It’s a sector that sees lots of underground economic activity, says Jajic, who hears horror stories from workers who used to be part of it.
“The effect on workers who are exploited through misclassification can be devastating: no workers compensation if injured, no Employment Insurance if laid off and no Canada Pension Plan on retirement. It’s just wrong.”
