21 Aug 2014
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‘Underground Economy’ Targeted In Massive Sting Operation

Local construction sites suspected of operating illegally were among the more than 100 targeted statewide during June's "Operation Underground."

‘Underground Economy’ Targeted In Massive Sting Operation

A multi-agency sweep dubbed "Operation Underground" that took aim at suspected illegal construction sites has resulted in over 100 enforcement actions, the Contractors State License Board reported Monday.

Investigators from the Contractors State License Board, the state Department of Insurance, Employment Development Department, and county district attorneys’ offices partnered for a series of sweeps at suspected sites June 20 and 21.

Sweeps were conducted in 11 counties, including Riverside County. Two Riverside-area contractors and another in Temecula were among those slapped with citations.

In total, 104 enforcement actions were issued across the state for failure to carry workers’ compensation insurance, under-reporting the number of workers to obtain cheaper insurance premiums and to pay less payroll withholding tax, and cash payment to hide unregulated practices.

Uninsured, untaxed, unlicensed, and unregulated activity is referred to as the underground economy.

Sweeps took place in cities within Alameda, Butte, El Dorado, Kern, Los Angeles, Monterey, Orange, Riverside, San Bernardino, Santa Clara, and Yolo Counties.

The sweeps targeted 133 contractors, suspected of violating the state’s labor, employment, tax, and licensure laws. Some received stop orders for the workers’ compensation insurance violations, which means they are not allowed to use employee labor until they obtain a policy for their workers and submit proof to CSLB.

"Participants in the state’s underground economy are harmful to everyone," said CSLB Registrar Steve Sands in a released statement. "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."

CSLB spokeswoman Venus Stromberg told Patch the names of the companies nabbed in the sting were not being released yet due to processing and, in some cases, ongoing investigations.

Stromberg said the CSLB urges consumers to follow these tips when hiring a contractor:

  • Hire only licensed contractors and ask to see their license and a photo ID to verify their identity. Make sure that all subcontractors also have the appropriate licenses and that the contractor has a good payment history with those supplying project materials.
  • Always check the license numbers on CSLB’s Instant License Check to make sure the licenses are in good standing, and that employees are covered by workers’ compensation insurance.
  • Don’t pay more than 10 percent or $1,000, whichever is less, as a down payment. There is an exception for about two dozen licensees who carry special bonds to protect consumers. These exceptions are noted on CSLB’s website.
  • Don’t pay in cash, and don’t let payments get ahead of the work.

More information and publications about hiring contractors are available on the CSLB website or by calling 800-321-CSLB (2752).

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