Crackdown on California Underground Economy

On December 29th 2011 the Department of Insurance in California released the following bulletin. Employers who have operated honestly and with integrity toward their employees have struggled to compete against individuals operating business on a cash basis. A few of these legitimate business owners have succumbed to the illegal operations. It remains to be seen if the State of California departments mentioned and local district attorneys will actually commit the resources to follow up considering the current state of the economy.



Department of Insurance part of Labor Enforcement Task Force

Insurance Commissioner Dave Jones today announced that the California Department of Insurance (CDI) is joining with the Department of Industrial Relations (DIR) and other allied agencies to fight labor law and insurance related violations that exist in an underground economy.

The newly created Labor Enforcement Task Force (LETF), which will be headed by the DIR, will launch on January 1, 2012 and will be a collaborative effort along with the Attorney General, Employment Development Department, Contractor’s State Licensing Board, Board of Equalization, the Bureau of Automotive Repair and local district attorneys.

“I am pleased to join this collaborative effort to protect California workers,” said Insurance Commissioner Dave Jones. “I am committed to fair competition for honest business owners.”

The Department’s focus in this collaboration will be on those unscrupulous employers who under report payroll or mis-classify employees in order to obtain a lower rate for workers’ compensation coverage, thus committing premium fraud. This gives business owners, operating illegally in the underground economy, an unfair advantage over honest and law abiding employers when competing for business.

Since Commissioner Jones took office on January 1, the Department has pursued businesses operating illegally in the underground economy. Investigations have been conducted which have led to the arrest of 47 business owners for premium fraud involving approximately $41 million in unpaid premiums.

Mark O'Bryan

Vice President | Los Osos