Independent Contractor Compliance Blog - by Collabrus™

I was doing some research yesterday, looking for ideas on topics to report to you, and found a mass of articles about businesses that have recently been “audited” by either the state or federal branches of the Department of Labor. By way of background, the DOL enforces wage and hour, workman’s comp, and related laws.

Generally, labor agencies are increasing the number of “raids” on legitimate businesses.

To be fair they don’t call the visits raids. They call them sweeps, unannounced inspections, and sometimes unannounced enforcement sweeps. What would you call it if half-a-dozen government employees, armed with guns and badges showed up unannounced at your business? In California for example, Department of Industrial Relations (DIR) inspectors, working in the Division of Labor Standards Enforcement (DLSE), do carry guns and badges and are classified as police officers.

What does it feel like to be “swept?”

Typically, as soon as the “sweepers” arrive and identify themselves, they demand that everyone stop what they’re doing and then they check identification. Next, they inspect for labor law violations, safety violations, overtime violations, minimum wages, look at your record keeping practices, check for tax non-compliance, determine if you have misclassified workers, insure you have the proper licensing and anything else observed while onsite. It’s not uncommon for the business to be ordered to be closed down immediately and “citations” to be issued for many thousands of dollars. In these cases, the business is not allowed to reopen until they “fix” the problems and receive an “OK” from the inspectors.

California even brags… 

The California Economic Employment Enforcement Coalition (EEEC) was established in July of 2005 by Governor Arnold Schwarzenegger. The EEEC is a multi-agency task force designed to root out California’s “underground economy” by enforcing California labor laws, employment tax laws and educating business owners and workers about those laws and regulations. They focus mainly on California’s smaller businesses.

EEEC is currently targeting many low wage industries, but also has begun to target industries that use temporary help, believing these businesses have…”a high incidence of workplace violations and a lack of regulatory compliance…”

A few examples (taken from the EEEC’s web site) are:

• San Francisco-The Labor Commissioner’s Office barred a Vallejo contractor from participating in publicly financed projects for three years because it failed to pay prevailing wages on public works projects in 2006 and 2007. Lee’s Sheet Metal, Heating and Cooling, Inc. and its principals, Madison Thomas and Mary Caroline Thomas, cannot bid on or receive any public works contract for three years. The prohibition, officially known as a debarment, begins August 1, 2008.
• Santa Clara-June 19, 2008-California Labor Commissioner Angela Bradstreet today announced the issuance of a citation to a Santa Clara-based International Security Services, Inc. for failing to provide private accommodations for an employee to express breast milk for her newborn. The citation is the first of its kind since the law took effect in 2002. A fine of $4,000 was assessed.
• Sacramento, June 20, 2008 - Officials with the State Division of Labor Standards Enforcement (Labor Commissioner’s Office) issued 23 citations totaling $52,250 in fines to motels in El Dorado County as part of an ongoing effort to address noncompliance with workers’ compensation laws…
• Los Angeles-May 21, 2008- Officials with the State Division of Labor Standards Enforcement (Labor Commissioner’s Office) issued 54 citations totaling more than $279,500 in fines to construction firms in Los Angeles, Orange, Riverside, San Bernardino and San Diego Counties for various labor law violations…
• San Francisco-May 15, 2008. The California Department of Industrial Relations (DIR) today launched the Insurance Coverage Program, an enforcement program designed to identify and target employers who fail to carry workers’ compensation insurance. DIR Director John C. Duncan stated,  ”…By partnering with other agencies we are leveraging our resources to seek out illegally operating employers and to level the playing field for those who follow the laws.”

So your industry wasn’t represented in the above?

Good news, but that doesn’t mean that it won’t happen in your industry in the future.  If your industry shows up on their target, things can change.

How do they select targets?

California’s government alone employs hundreds of employees whose only responsibility is to find businesses to inspect.  These cyber detectives spend all day:

• Scanning government data bases, comparing them for inconsistencies
• Surfing the internet
• Searching the yellow pages
• Following up on complaints from former, or current, workers who are disgruntled.
• Making “drive-by’s” to observe business operations

 Other triggers are:

• A temporary worker is injured on the job and is not covered for Workman’s Compensation Insurance.
• Failure to properly pay overtime to workers
• EDD can “nominate” a business for an “unannounced inspections” if they suspect the business is misclassifying it’s employees as IC’s.

 Sometimes it’s good to be a little paranoid.