As an owner, general contractor, architect or engineer, you or your company makes important decisions about which trade contractors you employ on construction projects. As many people are aware, the construction industry represents one of the most, if not the most, significant area of underground economy activity in Canada today. Far too often, “fly-by-night” contractors who employ no workers, but instead use “labour-only” subcontractors premise their competitiveness with legitimate contractors on the advantages gained by paying workers under the table, in the full knowledge that no remittances for taxes will ever be made. Further, these underground economy contractors do not pay Employment Insurance premiums nor do they pay Workplace Safety and Insurance Board premiums. The results are that those legitimate contractors who actually pay appropriate wages, make remittances to Revenu Canada and pay Workplace Safety and Insurance Board premiums to provide benefits for workers, are at a significant competitive disadvantage in the marketplace. The result is that those benefiting from the underground economy force the rest of us to pay higher taxes, and force legitimate firms to pay higher Workplace Safety and Insurance Board premiums than they otherwise would. A recent Ontario Government report on keeping Ontario industries competitive in the global marketplace emphasized that underground construction firms eroded the competitiveness of legitimate firms on a number of fronts, and that this was damaging Ontario’s competitiveness.
Why is it a problem for you?
Aside from the fact that tax evasion by underground construction firms forces everyone to pay higher taxes to support government services, there are other significant disadvantages to employing underground economy construction firms. Many of these firms appear and disappear in different corporate incarnations with alarming regularity. There is always the risk with such a firm that they will not be around when it becomes clear how low quality their work has been, or that they may not be around at all to finish the work. When this is contrasted to legitimate, aboveboard contractors who are often long established in the local community, bondable, and who have genuine concern about their reputation for quality of work, the certainty represented by legitimate contractors ought to be attractive. Perhaps more potentially concerning for businesses which employ underground economy construction firms is the liability risk for owners, general contractors, and others with responsability for construction work sites. The fact that these fly-by-night operators utilize exclusively “labour-only” subcontractors, and do not “employ” anyone, obviously benefits them in that they are not obligated at this time to make Workplace Safety and Insurance Board premium payments. This competitive advantage is often reflected in their ability to bid at a lower cost. However one of the benefits of employing a contractor who actually utilizes “employees” and make Workplace Safety and Insurance Board contributions on their behalf is that those employees, when injured, receive Workplace Safety and Insurance Board benefits and are in exchange prevented from suing their employer or anyone else on the job site, in the event if they are injured. Because labour-only subcontractors are not “employees”, and are not covered by the Workplace Safety and Insurance Act, no one is protected from a lawsuit in the event of one of them is injured at the work site. In other words, an injured trade subcontractor may look to the general contractor or the owner for damages when he or she is injured on the job, given the fact that the company with whom he contracts will in all likelihood not be a source of likely funds recovery in a civil suit. Given the fact that these fly-by-night contractors also costs by cutting safety measures, the risk to owners and general contractors is very real. In the long-term, the fact that these “underground economy” construction contractors make no effort at training the trades people of the future is seriously undermining the ability of the industry to replace the large wave of tradespeople who will be retiring in the next decade. Shortages of skilled labour which have recently manifested themselves in Ottawa, will worsen the more the industry moves to an underground economy model.
What can you do?
- Ask if the interior systems trade contractor is a member of the Walls and Ceilings Conractors’ Association. This is the easiest way of ensuring a reputable, bondable, and aboveboard contractor able to perform quality work in a timely fashion
- Ask if the trade subcontractors actually employ trades people, or if they utilize “labour-only” subcontractors.
- Ask if the trade subcontractors remit taxes and employment insurance for their employees, and ask if they are registered with the Workplace Safety and Insurance Board.
- Contract Walls and Ceilings Contractors’ Association or the United Brotherhood of Carpenters and Joiners of America, Local 2041, for a list of contractors who play by the rules.
What are the benefits?
The benefits of using a reputable contractor and skilled union labour are significant, over and above the benefits of avoiding the risks identified above. Those additional benefits are set out in the attached brochure from Local 2041 of the United Brotherhood of Carpenters and Joiners of America. The Walls and Ceilings Contractors’ Association may be contacted at (613) 226-5550. Greater Ontario Regional Council of carpenters, Drywall and Allied Workers, Local 2041, may be contacted at (613) 746-1265. For further information, please visit the Ontario Construction Secretariat website at www.iciconstruction.com.