Labor Enforcement Report Shows High Rate of Noncompliance

Apr 13 2017 - Compensation, General, Workers' Compensation - Gail Cecchettini Whaley

labor enforcement report task force

Labor agencies find high rate of noncompliance.

Since 2012, the Department of Industrial Relations has assumed responsibility for the Labor Enforcement Task Force (LETF), which is a coalition of state government enforcement agencies formed to combat the underground economy, such as paying employees off the books or not carrying workers’ compensation insurance. This multi-agency task force conducts joint inspections and includes such agencies as the Employment Development Department (EDD), the Contractors State License Board, the Board of Equalization and the Attorney General’s office.

This task force recently released its Five -Year Report (2012-2016) to the California Legislature. In 2016, the LETF found an average of 91 percent of employers inspected each month were out of compliance with at least one LETF partner agency – a significant increase over previous years. In 2012, 75 percent of businesses inspected by the LETF were out of compliance.

The number of violations and amounts assessed against employers has also significantly increased.

For instance, the results from the Division of Labor Standards Enforcement (DLSE) show that:

  • The total number of businesses inspected increased from 999 in 2012 to 4,506 in 2016.
  • The total number of violations increased from 786 in 2012 to 4,004 in 2016.
  • The total assessment amount increased nearly five-fold, from $7,232,785 in 2012 to $35,339,002 in 2016.

In the five-year period, the number one type of DLSE violation was workers’ compensation insurance coverage, followed by wage deduction statement violations.

The EDD results show an increase in the estimate of unreported wages from $102,348,344 in 2012 to $692,867,734 in 2016.

Full results for all partner agencies are available in the report.

Targeted Inspections

The LETF conducts targeted inspections, and the new report discusses LETF’s targeting protocol.

The task force uses data from the various agencies to identify targets, such as wage claim data, licensing data and EDD data. The task force also uses information gathered from law enforcement, community-based organizations, complaints and tips received from the public.

The task force:

  • Identifies potential targets.
  • Conducts research to develop a business profile.
  • Sends the list of targets to EDD to see if they are registered and the number of employees reported by each one.
  • Sends the list to the Workers’ Compensation Insurance Ratings Bureau to determine if the employer is adequately insured.
  • Screens the business names using other agency databases to see if there are other areas of noncompliance

The LETF also conducts physical surveillance to confirm information received (including visual examination from a distant location and/or on-site visits). As noted in the report, the DLSE has the authority under Labor Code section 90 to access all places of employment. Other LETF partners do not have this full authority. In some circumstances, the DLSE may also issue stop orders requiring employers to cease illegal operations immediately.

Gail Cecchettini Whaley, CalChamber Employment Law Counsel/Content

It’s not easy doing business in California. State labor laws are complex.

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