A new report suggests at least 10 percent of Iowa construction trade workers were illegally classified as independent contractors instead of employees in 2022.
Common Good Iowa, an Iowa-based policy nonprofit focused on wage, workforce and quality of life issues in the state, released a report detailing wage theft and labor practices in Iowa’s construction industry. About 5 percent of the state’s workforce is employed in the construction industry.
Sean Finn, a policy analyst who authored the report, said at least 12,000 Iowa construction workers were misclassified as independent contractors, leading to significant tax fraud and wage theft and costing workers an estimated $43 million a year and the state and federal government millions in avoided income, Social Security and Medicare taxes.
Finn, speaking to reporters during a news conference Tuesday, said “an underground economy” has emerged in the construction industry over the past decade.
“Enforcement of labor standards is disturbingly low, and meaningful penalties for violations are basically nonexistent,” according to the report.
Finn stressed the need for state lawmakers to update Iowa’s wage payment collection law and require labor brokers — who work with contractors or subcontractors to provide workers for a fee — to register with the Iowa Department of Inspections, Appeals and Licensing.
Iowa Code requires registration of all construction contractors and businesses performing “construction” work. Finn, though, said the complex structure of construction work allows brokers to evade registration requirements by arguing they deal solely in providing labor. The report states contractors frequently negotiate a single project payment with the labor broker, who then distributes the cash among workers.
Recruited workers frequently receive pay below the minimum wage and fail to receive overtime pay, Finn said. He said Iowa lawmakers should amend Iowa Code to clarify that labor brokers are required to register as contractors, which would allow the state to ensure contractors are complying with unemployment insurance and workers’ compensation laws.
Independent contractors are ineligible for unemployment benefits if they’re laid off.
“We also hear a lot of stories of folks who face extreme medical debt because of injuries on the job site, while misclassified as an independent contractor, meaning they weren’t covered by workers’ comp,” Finn said.
The report notes billions of dollars will be flowing into the state’s construction industry over the next five years due to federal programs funded through the federal Inflation Reduction Act and bipartisan infrastructure law. That federal funding is attached to “strong pro-worker policies” that require prevailing wages and use of registered apprenticeships, according to Common Good Iowa.
“The investments will create thousands of good union jobs, which set a strong standard of safety and compensation, and train the qualified workforce of the future through registered apprenticeship incentives,” Finn said.
Common Good Iowa wants state lawmakers to follow suit and update the state’s wage payment collection law, hire more people to enforce the law and repeal state provisions that bar local governments from adopting minimum wage, prevailing wage and project labor agreement laws “that benefit workers and communities.”
“The state employs four investigators to oversee wage payment collection for a workforce of 1.6 million,” Finn said. “That’s not nearly enough. And so we need more funding to have investigators and to also to provide education to businesses employers who may not realize that misclassification is illegal — they might may not understand what their obligations are under the law.”
Advocates launch campaign for hands-free driving law
The Iowa Bicycle Coalition and more than 25 other groups representing law enforcement, health care, labor, business, transportation and insurance have launched a statewide campaign to press Iowa lawmakers to pass legislation next year banning the use of a handheld electronic devices while driving.
Under current law, drivers may use their phones on the road to take or answer a call and to use a GPS navigation system.
Distracted driving crashes have increased by 43 percent over the last decade, according to Iowa Department of Transportation crash data.
From 2014 to 2024 to date, 82 people were killed in the state by distracted drivers using a cellphone or another handheld electronic device, according to the Iowa DOT. Another more than 5,000 were injured during that period.
The Iowa Senate last year overwhelmingly passed a bill, Senate File 547, that would ban motorists’ handheld use of cellphones behind the wheel, but the Iowa House hit the brakes. It failed to advance during this year’s legislative session, after the proposal was combined with legislation that would ban traffic enforcement cameras.
Bills limiting cellphone use by mandating voice-activated or hands-free technology while driving have been introduced in the Iowa Legislature since 2019, but all attempts at passage have been unsuccessful.
Similar laws in states like Alabama, Michigan, Missouri and Ohio have proved effective at reducing crash rates, according to a 2024 report by the Governors Highway Safety Association. For example, Michigan saw a 10.2 percent drop, while Minnesota saw a more than 30 percent reduction in crashes.
The Iowa State Patrol and the Governor’s Traffic Safety Bureau conducted a survey during the 2024 Iowa State Fair that found nearly 85 percent of the more than 1,300 Iowans surveyed supported legislation mandating hands-free phone use. And 96 percent said they regularly see others driving with a cellphone in hand.
More than 30 states have passed laws prohibiting drivers from using handheld cellphones while driving.
“We know passing this law will save the lives of countless Iowans, plain and simple,” Luke Hoffman, executive director of the Iowa Bicycle Coalition, said in a statement.
Hoffman was hit on his bike this summer by a distracted driver while on a safety inspection ride for the Register’s Annual Great Bicycle Ride Across Iowa 19 miles outside of Knoxville, Axios reported. He largely was unharmed and counts himself lucky while other cyclists on Iowa’s roads have been killed by distracted drivers.
“We need lawmakers to have the courage to prioritize safety and stand with law enforcement on this issue to start saving lives,” Hoffman said.
Gazette-Lee Des Moines Bureau
