State Agencies Conduct Statewide Underground Economy Sweep

Sep 2 2014 - Record Retention, Workers' Compensation, Workplace Safety - HRWatchdog

Last week, the California Department of Insurance led enforcement teams from five state agencies and several county district attorneys on a statewide sweep of more than 50 businesses in a variety of industries, such as construction, hotels, restaurants, car washes and auto repair shops.

The statewide effort resulted in more than 80 citations, including five serious infractions that caused the Department of Industrial Relations and Contractors State License Board to issue stop-work orders.

Wage-and-hour compensation issues rank among the most active enforcement areas in employment law and preventing wage theft has been a top priority of the state Labor Commissioner, which enforces the state Labor Code and Wage Orders, as well as other state agencies.

A recent New York Times article highlights the “record number” of enforcement actions, and the burgeoning number of lawsuits filed in California and across the nation alleging wage-and-hour violations.

After conducting the sweep, the Department of Insurance emphasized the cost of wage theft not just to workers but also to California’s economy.

“Every day the safety of workers is placed at risk, legitimate businesses are at a competitive disadvantage and the state is defrauded out of millions of dollars because dishonest businesses cheat the system by participating in the underground economy,” said Insurance Commissioner Dave Jones in a statement. “As the eighth largest economy in the world, California’s share of the illegal underground economy likely totals into the tens of billions of dollars and is costly to the state’s economy.”

During the recent sweep, the Department of Insurance found 13 businesses without workers’ compensation insurance and a number of businesses were referred to the Employment Development Department, the State Board of Equalization and the Franchise Tax Board due to incomplete recordkeeping.

Altogether, the enforcement agencies issued more than $135,000 in fines and citations for a variety of violations and also issued numerous referrals for follow-up reviews for licensing, insurance, safety and tax compliance. Additional violations included unreported worker injuries, no payroll records, evidence of cash pay and unreported workplace injuries.

As part of the statewide sweep, the enforcement teams educated businesses about their responsibilities and provided informational materials to promote compliance with insurance, licensing, workplace safety and labor laws, tax codes and regulations.

The enforcement teams were made up of representatives of the Department of Industrial Relations, the Contractors State License Board, the Department of Insurance, the Franchise Tax Board, the Employment Development Department and the Board of Equalization.

Shane Peterson, Senior Editor

The HR Library’s Pay & Scheduling section covers California’s extensive wage-hour laws for HRCalifornia members. CalChamber members can also download our free Eight Steps for Examining Your Wage Practices white paper which outlines key steps you need to take when you prepare a plan for a self audit (sign in required0.

Not a CalChamber member? Register to receive a free copy of the white paper.

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