California Construction Enforcement Project Targets Underground Industry

Earlier this year, California contractors applauded the creation of the Joint Enforcement Strike Force’s (JESF) Construction Enforcement Project (CEP) by the Contractors State License Board (CSLB), which was designed to break down silos among state agencies and take advantage of partnerships.

Specifically, the CEP capitalized on partnerships among 21 CSLB investigators, 21 Employment Development Department (EDD) agents, the California Department of Insurance and 19 counties based on their availability to provide district attorney investigators and building officials.

The coordinated efforts of the agencies have produced significant results, including but not limited to: 411 audit referrals for an estimated $48,553,626 in unreported wages; $25,832,017 in EDD and Franchise Tax Board outstanding tax and civil liability suspension amounts with $10,815,762 in penalties recovered; $17, 705, 752 in EDD tax and civil liability suspensions with $6,626, 208 in recovered tax liability; and additional license liability suspensions by the Department of Industrial Relations totaling $1,972,328 with $1,835,869 in penalties recovered.

But according to California contractors throughout the state, more needs to be done.

“Legitimate contractors in California appreciate the emphasis on construction,” said Brad Diede, California Professional Association of Specialty Contractors’ executive director. “In our opinion, this is just the tip of the iceberg. Continued focus on the construction industry will yield millions more in recovered penalties and tax revenue for the state while simultaneously ensuring legitimate taxpaying contractors get the work.”

The goals of CEP were to issue stop orders to uninsured employers; reduce owner-builder permits; increase joint enforcement presence with participating counties; target contractors that intentionally evade payroll taxes; and increase criminal filings for license and insurance violations.

“The efforts and results of the CEP and JESF demonstrate the value of state agencies working together to fight against the underground economy. We are encouraged by these programs, as well as the Labor Enforcement Task Force (LETF) that the Department of Industrial Relations began earlier this year,” said Diede. “These programs are making inroads into the non-compliance problem, which is causing havoc in the construction industry; but, we need to see more ongoing efforts like these if we are truly going to level the playing field for California’s businesses.”

California isn’t alone in recognizing the value of coordinated and concentrated efforts to break down the barriers for efficient and effective identification and elimination of cheating activities. Other states, such as Florida and North Carolina, are following California’s lead in launching task forces and enforcement efforts, like CEP, to curtail the division in the business community where those who play by the rules and abide by the law are disadvantaged in competing against those who skirt the law.

According to recent media reports, a task force of North Carolina state leaders “renewed promises to break down barriers that keep them from spotting and cracking down on business owners who skimp on taxes and workers’ compensation insurance.”

“It is encouraging to see enforcement agencies in California and other states like North Carolina coordinating their enforcement efforts, but we know there’s still much to be done,” stressed Executive Director Kate Leyden of the Valley Contractors Exchange. “We serve the counties of Butte, Colusa, Glenn, Plumas, Sutter and Yuba, and the stark reality is that the first comment coming out of a contractor’s mouth when I ask about his or her business is that unlicensed contractors are still underbidding jobs.”

The Western Electrical Contractors Association’s Executive Director and Chief Executive Officer Terry Seabury agrees with Leyden. “It’s too hard to stay in business in this economy when forced to compete on an unlevel playing field,” said Seabury. “That’s precisely why we support efforts like JESF and LETF, which put fraudulent contractors on notice and force compliance with the law.”

Leyden went on to say, “When we ask law-abiding contractors what they need to grow their businesses, their response is ‘for the state to stop making laws that aren’t or can’t be enforced because we can’t compete and survive against the unlicensed, uninsured, cash-paying contractors.'”

The California Professional Association of Specialty Contractors is a nonprofit 501(c)6 trade association advocating on behalf of trade contractors and suppliers of building materials in California. CALPASC initiated the LEVEL Program in 2010 to urge state agencies to work closely together in catching those in the construction industry who intentionally violate labor and safety laws and regulations to gain an unfair advantage over law-abiding contractors.

Source: California Professional Association of Specialty Contractors (CALPASC)