Is Your Business a Victim of the Underground Economy?
Posted on 02-Jun-08 by The Timekeeper
I recently came across an interesting article over at AllBusiness.com: How the Underground Economy Punishes Small Businesses.
You know, often when I write about companies not paying their employees according to the rules, the temptation is to focus on the impact this has on the employees — how they get paid less than minimum wage or get cheated out of overtime. But it isn’t just the employees who get hurt by these rogue companies.
What about the other companies… the ones who comply with federal and state laws? They’re placed at a significant disadvantage when they’re forced to compete against miscreants who underpay their workers. Because I think it’s obvious it’s much easier to be the low bidder on a contract when you’re not even paying your employees minimum wage.
Massachusetts recently enacted a law imposing triple damages for wage and hour violations. The article quotes Jennifer Stark, an assistant attorney general and head of the fair labor division in the Massachusetts Attorney General’s office, as saying, “Interestingly, we hear from many legitimate small businesses that they are thrilled that Massachusetts’ Attorney General Martha Coakley is vigorously enforcing the wage and hour laws. They concur with the AG’s assumptions that enforcement of the law will level the playing field within the small business community and allow them to become more successful. They will no longer be undercut by businesses that are not playing by the rules.”
I have to say I agree with that, and I’d like to see that same kind of vigorous enforcement in all the states.
As businesses, we need to make sure we aren’t contributing to the problem. We must insist on doing business only with others who play by the rules. Sure, it’s tempting to save a few bucks by going with the low bidder… but it’s important to make sure the low bidder didn’t get that way by illegally cutting corners on employee compensation.
When you turn a blind eye to what shenanigans your vendors might be perpetrating just so you can save a few dollars here and there, you only wind up hurting yourself in the long run. Think about it — you may well find yourself in contract negotiations going up against one or more of these rogue companies someday. Not to mention their underpaid employees have less money to contribute to the local economy… including purchasing the products or services you offer.
Food for thought, eh?
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