Ontario’s recent change to make Workplace Safety and Insurance Board (WSIB) coverage mandatory in the construction industry is being done to, among other reasons, combat the pervasive underground economy, says the Ontario Construction Secretariat (OCS).
As of January 1, 2013, almost every construction worker in the province of Ontario is required to be covered by the WSIB, a move that closes a loophole that allowed many contractors to style their employees as independent contractors.
“Before mandatory WSIB coverage, many Ontario construction workers were able to not only evade their taxes which fund important public services, but to also avoid making contributions to the funds that compensate injured workers,” says Sean Strickland, Chief Executive Officer of the OCS. “By closing this loophole, the government has taken an important step in prohibiting the underground economy in Ontario construction.”
The OCS has conducted several studies on the underground construction economy in response to growing concerns expressed by contractors and construction unions.
These studies provide evidence that:
- Underground construction activity amounts to between $1.4 billion to $2.4 billion in evaded taxes and WSIB fees, funds that are being siphoned away from public services at hospitals, schools, and injured workers’ medical expenses;
- Classing employees as ‘independent operators’ provides contractors with an unfair and illegitimate competitive advantage ranging from 20 per cent to 50 per cent of labour costs; and
- The underground economy undermines the coverage of benefit plans and weakens support for apprenticeship and training. By shifting costs onto others, the underground economy increases the operating costs of workers and contractors who follow the rules.
The WSIB has developed a website to provide information for construction employers on mandatory coverage: BeRegisteredBeReady.ca.