California cracks down on employers paying cash under the table

SAN DIEGO. On January 1, 2012, the Department of Industrial Relations (DIR) launched Labor Enforcement Task Force (LETF) to combat the underground economy and to improve California’s business climate for legitimate employers. While it is unclear whom exactly LETF is going to target, business owners should be on notice in order not to become a part of the state crackdown statistics. 

LETF, through the use of new technology, will implement wider information-sharing and collaboration between such agencies as the Employment Development Department, Contractor’s State License Board, Board of Equalization, the Bureau of Automotive Repair and the Department of Insurance. LETF will also collaborate with the Attorney General and local District Attorneys.

The official goals of LETF, according to the Department of Industrial Relations, are:

– Ensure workers receive proper payment of wages and are provided a safe work environment.
– Ensure California receives all employment taxes, fees, and penalties due from employers.
– Eliminate unfair business competition by leveling the playing field.
– Make efficient use of the state and federal resources in carrying out the mission of the Labor Enforcement Task Force.

LETF will target businesses that do not pay income taxes, unemployment insurance or disability insurance; do not carry workers’ compensation coverage; do not pay proper wages; and do not register for required licenses or permits. Significantly lower overhead of underground businesses makes it more difficult for legitimate businesses to compete.

At this point it is unclear what types of businesses will be LETF’s primary focus. In this economy, many small businesses scrape by and sometimes accept cash under the table just to be able to comply with all the state and federal labor requirements and taxes. Contractors hire occasional help without reporting it as employees because it would open up a big can of labor law worms that is not worth dealing with if you’re just hiring someone for a couple of days. At the other side of the spectrum, there are construction companies hiring dozens of illegal aliens and only reporting several legitimate employees for compliance purposes.