Combatting crooked contractors and worker exploitation in the construction industry

VAUGHAN, ON, April 11, 2025  

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.