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Multi-agency team conducts statewide outreach and enforcement effort targeting thriving underground economy

News: 2015 Press Release

For Release: May 21, 2015
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Multi-agency team conducts statewide outreach and enforcement effort targeting thriving underground economy
Safety, licensing and insurance violations lead to stop work orders and nearly $300,000 in fines

SACRAMENTO, Calif. - The California Department of Insurance yesterday led a statewide multi-agency outreach effort, visiting more than 75 businesses to educate business owners about their obligations to comply with insurance, licensing, workplace safety, labor laws and tax codes. The statewide effort focused on curbing California's multi-billion dollar underground economy.

Safety, licensing and insurance violations were found at approximately one-third of the businesses visited. Some businesses were issued immediate stop work orders and others were issued administrative citations. At one residential construction location in Los Angeles the contractor was unlicensed and had no insurance, which put the homeowner at significant financial risk.

"Homeowners may not realize they are financially vulnerable if a contractor or vendor they hire does not have workers' compensation insurance," said Insurance Commissioner Dave Jones. "Homeowners should always check to make sure anyone they hire has a valid workers' compensation insurance policy."

The statewide effort resulted in more than 15 citations, multiple stop work orders and nearly$300,000 in fines. The Contractors State License Board and the Labor Commissioner's Office issued 19 stop work orders for having workers on the jobsite with no workers' compensation insurance. Cal/OSHA issued six orders to stop work where hazards could have injured employees. The Employment Development Department plans to initiate 31 audits, based on information from the businesses visited.

Enforcement teams from five state agencies including the Department of Industrial Relations, Contractors State License Board, Department of Insurance, Franchise Tax Board, and the Employment Development Department and several district attorney investigators visited a variety of businesses, including restaurants, carwashes, supermarkets, and a number of residential construction sites to verify contractors had valid licenses, workers' compensation insurance and to check that workplace safety measures were followed.

"Consumers andlegitimate business people are hurt by this type of underground activity," said CSLB Registrar Cindi Christenson. "Homeowners who hire unlicensed workers can be ripped off, have their property damaged or be liable if a worker is injured. It also hurts the legitimate licensed contractors who follow the law and do things right."

While each participating agency conducts its own enforcement and compliance investigations and audits throughout the year, regulators often collaborate in multi-agency outreach and compliance efforts to educate business owners and have an impact on the state's illegal underground economy, which according to a UCLA labor study estimate cost California between $60 and $140 billion annually and creates an unfair and illegal competitive advantage.

Media Notes: Agencies participating in yesterday's operation took a number of actions to address violations including issuing immediate stop work orders, issuing citations and fines. In some cases the administrative action could lead to criminal charges being filed by the district attorney. For detail regarding administrative actions and dispositions of cases, please contact the appropriate regulator. 

Examples of workers'compensation and licensing compliance issues:

Downey- At a residential construction site, the contractor provided a valid license but when the CSLB officials verified the license, the license holder reported no knowledge of the job or the contractor working on the site. The investigator ordered the contractor at the location to immediately stop work on the home.

San Diego - At another residential location, three laborers were installing pavers. A CSLBinvestigator found the contractor's license had been suspended and he had no workers' compensation insurance. The investigator contacted the license holder to notify him that a stop work was issued until his license was active and he had appropriate coverage for employees.

Department contacts:

  • Photos available on the CDI Flickr page 
  • Video footage is available to the public: Video 1  and Video 2
  • Additional outreach footage available upon request.     

Types of businesses visited

  • Residential landscaping
  • Commercial and residential construction
  • Car washes
  • Restaurants
  • Carpet and flooring companies
  • Bail bond agents
  • Supermarkets
  • Auto repair shop
  • Towing company

The California Department of Insurance, established in 1868, is the largest consumer protection agency in California. Insurers collect $289 billion in premiums annually in California. Since 2011 the California Department of Insurance received more than 1,000,000 calls from consumers and helped recover over $469 million in claims and premiums. Please visit the Department of Insurance web site at Non-media inquiries should be directed to the Consumer Hotline at 800.927.HELP or 213.897.8921. Telecommunications Devices for the Deaf (TDD), please dial 800.482.4833.

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