California’s Labor Enforcement Task Force Continues to Set Fire to the Underground Economy
If you’re a fan of the Hunger Games trilogy, either the books or the movies, you’re likely familiar with “The Hob,” the black market in District 12 where people buy and sell banned items. It’s where bow-wielding protagonist Katniss Everdeen and her childhood friend Gale Hawthorne sell their poached game and where, in the movie but not the book (what can we say, we’re fans), Katniss obtains the “mockingjay” pin which she is later associated with. While The Hob is largely ignored by soldiers of the totalitarian “Capitol,” in the third book Catching Fire, the Hob is reduced to a pile of rubbish and ash by the Capital as an example to punish the insurrectionists led by Katniss.
The Labor Enforcement Task Force (LETF), a joint task force composed of several of California’s agencies including the Contractors State License Board, Department of Industrial Relations and Employment Development Department is also setting fire, at least figuratively, to California’s underground economy. See our earlier post Joint Labor Task Force Targets Underground Economy for further background on LETF.
According to its end of year review, in 2015 LETF issued nearly $8 million in initial assessments, an increase of more than $2 million over the same period in 2014. As a joint inter-agency task force, LETF operates under the assumption that the underground economy likely has violations in multiple areas of the law.
In 2015, for example, 42% of LETF inspections resulted in violations with multiple agencies including the Division of Labor Standards Enforcement, Employment Development Department and Division of Occupational Safety and Health (Cal/OSHA). Further, 86% of businesses inspected by LETF were found to be out of compliance in at least one enforcement area.
The “underground economy” refers to a business operating off-the-books. Some examples of an employer’s practices in this underground economy include failing to pay taxes, paying workers cash, engaging in wage theft, failing to carry workers’ compensation, failing to provide employees with breaks and adequate facilities, and failing to ensure a safe work environment. An estimated $8.4 to 28 billion is lost in unpaid income, insurance and sales taxes due to the underground economy.
Construction, however, is only one of the industries which LETF has focused on. LETF has also conducted investigations in the agriculture, automotive, car wash, garment, manufacturing and restaurant industries. Construction though remains one of the primary industries which LETF has focused on.
This past year, for example, the California Labor Commissioner recorded a mechanics lien against Varsity Berkeley, a new 79-unit housing development in Berkeley, California, to recover approximately $60,000 in unpaid wages for 21 construction workers after a local union filed a complaint against the project’s general contractor Donohue Construction. The LETF investigation also found that Donohue Construction failed to carry a valid workers’ compensation insurance policy, which resulted in a $25,500 citation.
Since its inception, LETF has assessed $4.2 million in wages due to workers. I could end by saying “may the odds be ever in your favor,” but better yet, just comply with the law.
California Construction Law Blog | Nomos LLP 
One Response to “California’s Labor Enforcement Task Force Continues to Set Fire to the Underground Economy”
[…] more information on the ongoing efforts targeting the underground economy, read here and here. Your mission, should you choose to accept it, involves complying with California’s laws. Because […]