The Underground Economy is probably the second oldest profession in the world.

I know that employers have been taking short cuts since the early 70’s.  I can remember in those days I had a janitorial service.  Even then employers were paying employees under the table and going without workers compensation.

Underground Economy

We used to call them “fly by nights who have mop will travel.”  Like all legitimate business owner, we were not happy with those business always taking short cuts and yet were also there to bid on all the good jobs.

Well, recently there has been some way overdue good news on the front of the “underground economy” that has been around sent dirt itself.  And as Paul Harvey used to say here is the rest of the story.

In 2013-2014 California’s Labor Enforcement Task Force (LETF), a coalition of government enforcement agencies under the direction of the Department of Industrial Relations began to crack down on business that was out of compliance.

This all-star Enforcement Team was made up of the following government entities

  1. The Division of Occupational Safety and Health,
  2. The Employment Development Department,
  3. The Contractors State License Board,
  4. The Bureau of Automotive Repair,
  5. The Agricultural Relations Board,
  6. The Department of Insurance,
  7. The Labor & Workforce Development Agency and
  8. The Attorney General along with district attorneys throughout the state.

The agencies found that working jointly gave enforcement inspectors more tools then when working separately. According to the stats, this plan seemed to pay off because 40 percent of the joint inspections resulted in violations by every participating agency.

The good news in concerning the Underground Economy  just keeps getting as demonstrated by what happened in 2015. In that year, the LETF distributed almost $8 million in primary assessments, an escalation of more than $2 million above the same period in 2014.

OUT OF COMPLIANCE

The California Labor Enforcement Task Force inspected almost 1400 businesses in 2013-14. The result was that most employers were not in compliance.  Following is the breakdown of the industries and the percentage of those industries that were not in compliance.

  • Automotive: 94 percent
  • Garment: 87 percent
  • Construction: 81 percent
  • Restaurant: 75 percent
  • Other*: 74 percent
  • Beauty salon: 73 percent
  • Agriculture: 72 percent
  • Manufacturing: 71 percent
  • *Other includes car wash, recycling, warehouse, and wholesale

Source: Department of Industrial Relations

The areas of non-compliance ranged from the following:

  • Failing to have the proper licenses,
  • Paying employees under the table
  • Miss Classification of Independent Contractors
  • Failing to have Workers Compensation Insurance
  • Failing to comply with Cal-OSHA Safety Standards

The “Underground economy” is bad for everyone.  Employees don’t get paid what they should be paid and because of the non-compliance the safety of employees is not what it should be.  In addition to that legitimate business also find it hard to make a profit, and should one of the compliant business go out of business because they cannot compete the entire community loses.

In 2016, we can expect to see more and more business get and stay in compliance because Cal-OSHA is now raising the fines by 80%.  This will help force business owners to finally pay attention to something that they should have been paying attention to for a long time.