Combatting crooked contractors and worker exploitation in the construction industry

The UBC's Tax Fraud Days of Action campaign runs from April 12-18, 2025

VAUGHAN, ON, April 11, 2025 /CNW/ - Canada's housing crisis is creating conditions for construction industry tax fraud to flourish. As all orders of governments across the country rush to help add supply, they must also be conscious of the increasing risks posed to construction workers and law-abiding construction companies.

The caution comes from the Canadian District of the United Brotherhood of Carpenters and Joiners of America (the "UBC") as part of Tax Fraud Days of Action. The annual campaign which raises awareness of unfair labour practices and worker exploitation in the construction industry runs from April 12-18, 2025.

Government funding is already being applied in many Canadian communities to help fast track housing developments. However, the urgency to provide support for new builds without also adding enforcement to crack down on bad actors in the construction industry will only deepen the problem.

"The residential construction industry is already Canada's worst offender when it comes to tax fraud," explains Jason Rowe, District Vice President of the UBC Canadian District. "We're talking about rot so entrenched that it's an understood part of the business model for industry players spanning owners, developers, general contractors, subcontractors, and labour brokers."

Residential construction comprises 32.7 per cent of all underground economic activity in Canada which reached $72.4 billion in 2023, according to Statistics Canada. At its current rate of growth, the residential construction industry could comprise 50 per cent of the underground economy within a decade.

This will result in more workers being misclassified as independent contractors so fraudsters can pay them under the table and avoid paying for hard-earned pay and benefits, like worker protections, pension, health care, and employment insurance.

Crooked contractors who avoid paying workers protections unsurprisingly also have a legacy of running unsafe worksites where injuries become more commonplace. This combination can jeopardize worker safety, security, and potentially even their livelihoods.

With the number of shady actors in the industry continuing to grow, their illicit cost-cutting practices also make it more difficult for legitimate contractors and law-abiding businesses to stay competitive.

"The other big victim of construction industry tax fraud is Canadian taxpayers," says Rowe. "The billions of dollars at stake in the underground economy represent monies that aren't flowing back to taxpayers and government where they belong. This lost revenue should be invested back into our communities for things like schools, health care and other essential services."

The UBC Canadian District is seeking to partner with all orders of government and take steps towards eliminating construction industry tax fraud. These steps include:

• Provincial governments implementing General Contractor Liability legislation
• Increasing transparency in procurement processes on all government-funded projects
• Requiring apprentice minimums on all government-funded projects

As part of this year's Tax Fraud Days of Action campaign, the UBC Canadian District has launched an animated video that offers an easy-to-understand primer on the issue, who is involved, challenges and outcomes. To view the video and for more information on the campaign, visit stoptaxfraud.ca.

Worker exploitation key to success for shady contractors 

Canada's construction industry finds itself at a strange crossroads, one that is creating a perfect storm for the underground economy and worker exploitation to flourish.

According to BuildForce Canada estimates, nearly 400,000 workers will be required to meet construction industry growth demands and to replace the 20 per cent of the current workforce projected to retire over the next decade.

At the same time, Canada's housing shortfall is estimated be roughly 3.5 million units, according to the Canada Mortgage and Housing Corporation, which says those units will be required to restore affordability to the housing market by 2030.

Canada's residential construction industry will therefore see much needed growth in coming years, both in terms of supply and labour demands. And yet, this has the potential to cause an undesirable expansion to Canada's underground economy.

When it comes to tax cheats and worker exploitation, the residential construction industry is one of Canada's worst offenders. According to Statistics Canada, residential construction accounted for 32.7 per cent of the country's $72.4 billion in underground economy activity in 2023. At its current rate of growth, residential construction could comprise half of the underground economy within a decade.

Contractors, and by extension the subtrades and the labour brokers that support them, will routinely try gaming the system by convincing construction workers to become independent contractors. This misclassification and being paid in cash are sold as a way for workers to earn "more" money, but many don't understand the implications or costs associated with doing so.

By misclassifying workers as independent contractors and paying them under the table to avoid taxes, fraudsters cheat workers out of hard-earned pay and benefits. These benefits include worker protections like pension, health care, workmen's compensation, and employment insurance.

Another challenge to meeting workforce demands is the Government of Canada's recently announced 2025–2027 Immigration Levels Plan, which will pause short-term population growth to achieve more sustainable and better managed growth over the long term. The plan includes controlled targets for temporary residents like international students and foreign workers, as well as for permanent residents.

This has become a balancing act for our industry: the push to recruit new workers to support construction industry forecasts and address the housing shortfall while reduced immigration will shrink our supply of new labour. Despite the pullback, Immigration Canada has stated that immigration remains a cornerstone of the country's labour force growth.

Immigration curtailment is designed in part to help governments across the country play catch-up on housing needs in their respective jurisdictions. This catch-up involves massive investments in new housing, which unfortunately will exacerbate issues for construction workers in the housing industry.

The underground economy already disproportionately impacts newcomers to Canada, who are often more susceptible to labour trafficking and worker exploitation, and who also comprise a significant part of the residential construction industry workforce. With more funding being funneled into housing projects across the country and the recognition that immigration is still driving our workforce growth, the potential for Canada's construction industry tax fraud crisis to deepen is high.

Immigration, Refugees and Citizenship Canada has taken positive steps to help address some of these issues. This includes a recent pilot project for construction workers in the GTA which provided a pathway to permanent residency for workers who entered Canada legally but who subsequently lost their status. A commitment to expand on the program was made in March 2025, and included a new measure that will also allow foreign workers to begin an apprenticeship without a study permit.

Even with these measures, it's quite possible newcomers brought in to help address Canada's construction industry workforce challenges may end up working on projects that contribute to the underground economy.

To ensure one solution doesn't become another problem, Canada must match its commitment to immigration and housing by ensuring workers are paid prevailing wages. By investing in skills and training programs for workers, it reduces the likelihood they will be exposed to the pitfalls of the underground economy. We also need continued investment in enforcement to help crack down on our industry's worst offenders, protect workers and ultimately, Canadian taxpayers.

The United Brotherhood of Carpenters and Joiners of America's Tax Fraud Days of Action campaign runs from April 12-18, 2025. To learn more, visit stoptaxfraud.ca.

Jason Rowe is the District Vice-President of the United Brotherhood of Carpenters Canadian District.

SOURCE Carpenters' Regional Council

Yuri Wuensch, Government Relations & Communications, Carpenters' Regional Council, Phone: [phone], Cell: 780-233-8765, [email protected]