California Task Force Cracks Down on Underground Economy, Targets Specified Industries

Mar 17 2015 - Compensation, Minimum Wage, Overtime - Gail Cecchettini Whaley

California’s Labor Enforcement Task Force (LETF) continues to target businesses that violate laws designed to protect workers and California’s economy. Since 2012, the LETF has assessed $4.2 million in wages due to workers, according to a recent report submitted to the California Legislature, and inspected nearly 4,300 businesses suspected of operating in the underground economy.

Businesses that operate in an “underground economy” may engage in such activities as hiring employees off the books and paying them under the table, not withholding and remitting state disability insurance contributions, failing to protect workers as required by workplace health and safety regulations, and not carrying adequate workers’ compensation insurance coverage.

Not only do businesses in the underground economy harm workers, but “these underground operations also have an unfair advantage over legitimate, law-abiding employers,” said Christine Baker, director of the Department of Industrial Relations (DIR), which administers the multi-agency task force.

Consistently, LETF joint inspections have found high rates of noncompliance; on average, more than 80 percent of LETF inspections resulted in penalties for noncompliance. Moreover, 40 percent of businesses were out of compliance with every agency participating in the inspection.

Dominic Forrest, acting chief of the LETF said the task force focuses on underground employers in high-risk industries where noncompliance has been a particular problem.  The targeted industries include:

  • Car washes
  • Restaurants
  • Garment manufacturing
  • Roofing, construction
  • Agricultural
  • Auto repair businesses

LETF is a coalition of California State government enforcement agencies that work together and in partnership with local agencies. The agency partners include: the Labor & Workforce Development Agency;  Cal/OSHA ; the Labor Commissioner’s Office; the Employment Development Department; the Contractors State Licensing Board; the California Department of Insurance; the Board of Equalization; the Bureau of Automotive Repair; Alcoholic Beverage Control; the State Attorney General and district attorneys throughout California.

Gail Cecchettini Whaley, CalChamber Employment Law Counsel/Content

Complying with California’s employment laws is a complex task. HRCalifornia offers numerous resources, from comprehensive California employment law information to assistance from the CalChamber Labor Law Helpline’s HR advisers.

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