Contractors Under-reporting to Avoid Work Comp Insurance
California officials report dozens of workers have been hit with citations in a statewide sweep targeting contractors for allegedly under-reporting payrolls in order to avoid paying higher workers compensation insurance and taxes, according to state officials.
The Contractors State License Board, Department of Insurance and Employment Development Department (CSLB) jointly conducted “Operation Underground” last month to check for potential “off the books” activity by 133 contractors, resulting in 104 citations and stop orders, according to the CSLB.
A CSLB spokeswoman said it may take up to a year to complete investigations arising from the two-day sweep.
Misdemeanor or Felony Charges
Misdemeanor or felony charges could be filed, depending on the level of wrongdoing uncovered, she said, adding that, in the meantime, none of the contractors can be identified.
Contractors in 11 counties were cited during Operation Underground.
“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.”
Tips for Hiring Contractors
Officials reminded people planning to hire a contractor for residential or commercial work to keep the following in mind:
– any contracting job valued at more than $500 requires a license;
– unlicensed contractors can perform work that’s less than $500, but they must disclose that they’re not licensed in ads, according to state law;
– before anyone hires a contractor, they should verify the person’s license via the CSLB’s website, www.checkthelicensefirst.com;
– obtain at least three bids; and
– never pay more than 10 percent of the total estimated cost of a job, or $1,000, whichever is less.
Author Michael B. Stack, CPA, Director of Operations, Amaxx Risk Solutions, Inc. is an expert in employer communication systems and part of the Amaxx team helping companies reduce their workers compensation costs by 20% to 50%. He is a writer, speaker, and website publisher. www.reduceyourworkerscomp.com. Contact: [email protected].
WORKERS COMP MANAGEMENT MANUAL: www.WCManual.com
Do not use this information without independent verification. All state laws vary. You should consult with your insurance broker or agent about workers comp issues.
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