Multiple government agencies in the state of California are officially joining forces to crack down on the so-called "underground economy," meaning both uninsured employers, and those employers who abuse state employment and work comp laws.
According to news reports, the following government agencies/offices are forming the new Labor Enforcement Task Force: the Department of Industrial Relations, the California Attorney General, District Attorneys in several counties, the Department of Insurance, the State Board of Equalization, the Bureau of Automotive Repair, the Employment Development Department, and the Contractors State License Board.
Here, the participating government agencies/offices will focus a significant degree of their efforts on detecting and prosecuting work comp fraud, including instances where employers fail to obtain work comp coverage or purposely underreport payroll/misclassify employees in an attempt to secure a lower work comp coverage rate.
"Legitimate businesses grow California's economy," said Christine Baker, Dept. of Industrial Relations Director. "They are our economic backbone. This effort is using state resources judiciously in a time of limited funding to allow key agencies to collaborate and direct their best efforts to fight the menace of the underground economy."
For several years, many employers and industry groups in California -- including the California Spa and Pool Industry Education Council -- actively lobbied for legislative action to stem the growth of the underground economy. Some of these efforts included supporting bills calling for the regulation of payment practices by certain employers and the exemptions granted to licensed contractors. However, these efforts ultimately proved unsuccessful.
It is worth noting that Insurance Commissioner Dave Jones has indicated that his office will be leading the charge against work comp fraud and that previous investigations by the Department of Insurance resulted in the arrest of 47 business owners.
If you are an uninsured California employer facing a real problem - prospective fine, prosecution, an employee injury or litigation - there are steps that can be taken to minimize the consequences. In these difficult circumstances, you may want to consider consulting with an experienced legal professional.
This post was provided for informational purposes only and is not to be construed as legal advice.
The Orange County Register, "California targets underground economy" Jan. 1, 2012