Multiple state agencies conduct statewide underground economy sweep

Multiple state agencies conduct statewide underground economy sweep

The California Department of Insurance on August 27, 2014 led a statewide multi-agency outreach effort, visiting more than 50 businesses to educate business owners about their obligations to comply with insurance, licensing, workplace safety and labor laws, tax codes, and regulations. Enforcement teams from five state agencies and several county district attorneys, including the Department of Industrial Relations, Contractors State License Board, Department of Insurance, Franchise Tax Board, Employment Development Department and the Board of Equalization swept across the state to visit a wide variety of businesses, such as construction, hotels, restaurants, car washes and auto repair.

“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. “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.”

The statewide effort resulted in more than 80 citations, including five serious infractions resulting in stop-work orders issued by the Department of Industrial Relations and Contractors State License Board. The Department of Insurance found 13 businesses without workers’ compensation insurance and a number of businesses were referred to the Employment Development Department, State Board of Equalization, and the Franchise Tax Board due to incomplete recordkeeping. More than $135,000 in fines and citations were given for a variety of violations and numerous referrals were issued 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 this statewide effort the teams educated all businesses visited about their responsibilities as well as provided informational materials to promote compliance.

While each allied agency participating in yesterday’s sweep conducts its own enforcement and compliance investigations and audits throughout the year, departments are looking for ways to collaborate in multi-agency outreach and compliance efforts to educate more business owners and have an impact on the state’s illegal underground economy.

Source: California Department of Insurance

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