Operation Underground Takes Aim at "Off the Books" Activity
CSLB and partners to take action against contractors operating in California’s underground economy
SACRAMENTO —Investigators from the Contractors State License Board (CSLB) and their counterparts from the state Department of Insurance (CDI), Employment Development Department (EDD), and county district attorneys’ offices partnered for a series of sweeps at suspected illegal construction sites on June 20 and 21, 2012. Sweeps were conducted in 11 counties, where 104 enforcement actions were issued for failure to carry workers’ compensation insurance, under-reporting the number of workers to obtain cheaper insurance premiums and to pay less payroll withholding tax, and cash payment to hide unregulated practices. Uninsured, untaxed, unlicensed, and unregulated activity is referred to as the underground economy.
Sweeps took place in cities within Alameda, Butte, El Dorado, Kern, Los Angeles, Monterey, Orange, Riverside, San Bernardino, Santa Clara, and Yolo Counties. CSLB and its partners targeted 133 contractors, suspected of violating the state’s labor, employment, tax, and licensure laws. Some received stop orders for the workers’ compensation insurance violations, which means they are not allowed to use employee labor until they obtain a policy for their workers and submit proof to CSLB.
"Participants in the state’s underground economy are harmful to everyone," said CSLB Registrar Steve Sands. "Anyone who neglects their responsibility to comply with state contracting, insurance, and payroll requirements drives up premiums. At the same time, legitimate licensed contractors struggle because illegal operators underbid them."
"Operation Underground is a result of the partnership under the Joint Enforcement Strike Force which is made up of various state agencies including CDI, CSLB, and EDD to aggressively combat the underground economy," said Insurance Commissioner Dave Jones. "Legitimate businesses that play by the rules are often forced to close their doors because illegal businesses are cheating the system."
Highlights of the two-day operation, by county, are as follows:
- Investigators issued two citations for workers’ comp violations and stop orders in Pleasanton. One of them also faces contracting without a license charges. In Dublin, one was cited for workers’ comp violations and received a stop order (Alameda County).
- Investigators in Chico opened one insurance investigation, and two contracting citations are pending in Paradise (Butte County).
- Six citations were issued for workers’ comp violations, and three investigations and audits were opened in South Lake Tahoe (El Dorado County).
- In Bakersfield, two insurance fraud and two EDD investigations were opened (Kern County).
- One contractor caught in Inglewood and another in Santa Clarita will face tax audits (Los Angeles County).
- One insurance investigation was opened in Salinas; three were cited for workers’ comp violations in Pebble Beach; one was cited in Carmel for contracting without a license and illegal advertising; and two were cited for workers’ comp violations and received stop orders (Monterey County).
- Two contractors caught in Riverside face EDD audits, along with one in Temecula (Riverside County).
- One contractor caught in Ontario received a citation for workers’ comp violations and faces an EDD audit; one caught in Chino Hills faces an EDD audit; one contractor at a Fontana jobsite received a citation for aiding and abetting a non-licensee who was cited for contracting without a license and failure to carry workers’ comp; and one EDD audit was opened in Upland (San Bernardino County).
- Sixteen EDD audits were opened and one person was cited for workers’ comp violations in San Jose; and one EDD audit was opened in Campbell (Santa Clara County).
- In Woodland, investigators issued six stop orders for workers’ comp violations and opened six investigations for insurance and tax fraud (Yolo County).
CSLB urges consumers to follow these tips when hiring a contractor:
- Hire only licensed contractors and ask to see their license and a photo ID to verify their identity. Make sure that all subcontractors also have the appropriate licenses and that the contractor has a good payment history with those supplying project materials.
- Always check the license numbers on CSLB’s Instant License Check to make sure the licenses are in good standing, and that employees are covered by workers’ compensation insurance.
- Don’t pay more than 10 percent or $1,000, whichever is less, as a down payment. There is an exception for about two dozen licensees who carry special bonds to protect consumers. These exceptions are noted on CSLB’s website.
- Don’t pay in cash, and don’t let payments get ahead of the work.
The Contractors State License Board operates under the umbrella of the California Department of Consumer Affairs. More information and publications about hiring contractors are available on the CSLB website or by calling 800-321-CSLB (2752). You can also sign up for CSLB email alerts. CSLB licenses and regulates California's 300,000 contractors, and is regarded as one of the leading consumer protection agencies in the United States. In fiscal year 2010-11, CSLB helped recover nearly $45 million in ordered restitution for consumers.
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