UNLICENSED Illegal Operators



Reporting Contractors Who Participate
In The Underground Economy

Are you a landscape contractor who has lost jobs to:
Individuals who contract for landscape and other construction work without a license?
or
Competitors who do not pay workers' compensation insurance, disability insurance, unemployment insurance, federal and state employment taxes, or prevailing wages?

If you are a victim of these illegal activities, the California Landscape
Contractors Association has some good news for you:

There are several entities in state government that enforce laws pertaining to the underground economy in the construction and landscape maintenance industries. They include the following: Contractors State License Board, Labor Enforcement Task Force, Joint Enforcement Strike Force, Public Works Enforcement Unit in the Labor Commissioner’s Office, and Department of Insurance.

But you have to do your part:

If you really want to get rid of your illegal competition, you must get involved. You must report illegal activities to the proper state agency. This web page is intended to help you do that. It gives you some brief information about the mission of each enforcement entity, the kinds of illegal activity that are of interest to each one, how to contact the entity, and how the entity operates when provided with an illegal activity lead.

CLCA regrets that we can't make an underground economy participant disappear with a snap of our finger. But we strongly believe that if you follow up on our suggestions and information, and take individual action, you'll be surprised at what can be achieved.

Contractors State License Board

The Contractors State License Board (CSLB) licenses contractors and regulates the construction industry to protect California consumers. Individuals who perform construction work on a project where the combined cost for labor and materials is $500 or more must have a contractor’s license.

If an unlicensed contractor is performing work on an active job site, the best way to let CSLB know about that activity is to report it to the board’s Statewide Investigative Fraud Team (SWIFT). This is best done by completing a SWIFT Lead Referral form on the How Can I Report Unlicensed Activity? page on the CSLB website.

The form requires you to provide information such as the address of the project, the approximate number of employees on the project, and how long you think the suspects will be on the job site. You also must provide your name and contact information in case SWIFT needs to contact you for further information. You can request that your name remain confidential, although the suspect could conceivably learn it in the unlikely event the case file is subpoenaed.

You should definitely try to provide SWIFT with as much information as possible. Try to get the operator's name, address, phone number, vehicle make and vehicle license number. Get the address of his or her jobs in progress. Get the project owner's name, address and phone number. Collect the operator's advertisements, fliers and business cards.

Is the person using a contractor's license number? If so, make a note of the number. Check with the CSLB to find out if the person or firm is licensed, and licensed in the proper category. To check a license, go to the CSLB's License Status Check. You'll find a wealth of information there on all of California's licensed contractors.

Submit the completed Lead Referral form and any supplemental information via email to the appropriate SWIFT Unit. There are three SWFT units in the state: Northern SWIFT, Central SWIFT and Southern SWIFT. The CSLB's How Can I Report Unlicensed Activity? page lists the counties covered by each unit. The same page also lists the email addresses, street addresses, phone numbers and fax numbers of each of the three units.

 
CLCA encourages licensed
contractors to be the
eyes and ears of SWIFT.

SWIFT processes the leads according to the date of receipt, priority and staff availability. Unfortunately, job sites in “remote” areas such as Mendocino, Santa Barbara and Stanislaus counties may not be as likely to be investigated as those in large metropolitan areas.

If, for whatever reason, SWIFT cannot send enforcement personnel to an active job site, that does not mean you wasted your time and effort sending the referral. The SWIFT unit may invite the suspect to a future sting operation in the area. Sting operations involve SWIFT enforcement personnel posing as consumers to catch unlicensed individuals in the act of offering to do construction jobs in excess of $500. These operations have a very high success rate.

CLCA encourages licensed contractors to be the eyes and ears of SWIFT. Send the appropriate SWIFT unit information on those unlicensed contractors who are taking the biggest jobs from you—the most egregious offenders. And don’t be shy about contacting SWIFT to inquire about the status of a lead. SWIFT tells CLCA that its enforcement personnel are willing to notify a person who submits a lead about the status and results of an investigation.

Do not send SWIFT leads about unlicensed individuals mowing, edging, leaf blowing, or shrub pruning. Those gardening activities do not require a construction license.

If you have knowledge that someone without a license is acting as a contractor, but that person is not on an active job site, or an active job site that you know about, you should not submit a SWIFT Lead Referral Form. Instead submit a CSLB Construction Complaint Form via the U.S. Postal Service. Attach printed evidence that the person is contracting without a license. Include, for example, business cards, website pages, classified advertisements, etc. There are two different addresses to mail the form, depending on where the unlicensed person is located. The addresses are provided with the form information on the CSLB website. These leads are handled differently than those involving active job sites. The suspect probably will be invited to a future sting operation.

This same form can be used to complain about a person whom you believe is licensed, but not in the correct classification. Be aware that out-of-classification leads from competing contractors are given a very low priority when it comes to enforcement.

Labor Enforcement Task Force

The Labor Enforcement Task Force (LETF), under the direction of the Department of Industrial Relations, is a coalition of state government enforcement agencies that work together and in partnership with local agencies to combat the underground economy. In this joint effort, information and resources are shared to ensure employees are paid properly and have safe work conditions and that honest, law-abiding businesses have the opportunity for healthy competition. LETF participants include: Division of Labor Standards Enforcement, Division of Occupational Safety and Health, Employment Development Department, Contractors State License Board, California Department of Insurance, Alcoholic Beverage Control, Board of Equalization, Bureau of Automotive Repair and the State Attorney General.

Contact LETF if you suspect that a contractor is engaging in multiple unlawful activities, such as unlicensed contractor activity, exposing employees to unsafe working conditions, cash pay, not paying minimum wage or overtime, not reporting employees, not having workers’ compensation insurance, or misclassifying workers as independent contractors.

If you have an underground economy lead and you are not sure which agency to contact, LETF can help refer you to the correct agency. LETF collaborates and shares information with federal, state and local enforcement partners. LETF often cross checks data with other agencies—on the theory that if a contractor is cheating in one area of compliance, he or she is very possibly doing so in other areas as well.

It's very helpful to provide LETF with “an active jobsite location.” This is because LETF specializes in catching violators in the act.

If possible, leads should be accompanied by the violator’s contractor’s license information and/or advertising.

You can submit a lead or contact the task force at (855) 297-5322 or via email at letf[at]dir.ca.gov or the on-line Lead Referral Form.

Note: the LETF website is a good resource for information on the underground economy.

LETF is unable to provide information on the status of leads or ongoing investigations due to confidentiality constraints.

Joint Enforcement Strike Force

The Joint Enforcement Strike Force (JESF) is a coalition of state agencies that work together and in partnership with local and federal agencies to combat the underground economy primarily by investigating businesses that avoid paying payroll taxes. Think of it as being more "tax revenue focused" than the LETF coalition. The Employment Development Department is the lead agency for the strike force. The other partners and participating government entities are the Department of Consumer Affairs, Contractors State License Board, Bureau of Automotive Repair, Bureau of Security and Investigative Services, Department of Industrial Relations, Department of Insurance, Franchise Tax Board, Board of Equalization, Department of Justice, Department of Alcoholic Beverage Control, United States Department of Labor and United States Internal Revenue Service.

The JESF encourages leads from impacted workers as well as businesses and competitors. Leads can be provided by calling their hotline at (800) 528-1783. The coalition also has an online Fraud Reporting Form on the EDD website. A third reporting option is to download a paper lead form in English or Spanish.

Individuals providing leads can elect to remain anonymous when providing information on businesses suspected of operating in the underground economy. If you wish to remain anonymous, you should not put your name on a lead referral, as the accused has the right to see this report during the administrative proceeding and/or litigation process. The strike force has assured CLCA that anonymous leads are treated no differently from other leads.

Due to confidentiality constraints, JESF will not and cannot share the status or results of its investigations.

Labor Commissioner's Public Works Enforcement Unit

The Public Works Enforcement Unit within the Department of Industrial Relations’ Division of Labor Standards Enforcement, also known as the Labor Commissioner's Office, is responsible for ensuring compliance with the state’s prevailing wage laws on construction projects. This includes the review of certified payroll records, verification that workers on the projects are paid correctly, and enforcement of pay, overtime, record keeping, and hour limitation requirements.

Complaints about prevailing wage and apprenticeship cheating can be filed by anyone. The unit accepts complaints from unions, labor-management cooperation committees, public agencies, competitors, and other interested parties. If you are not a worker on the public works project, you should complete the Public Complaint Form. Be sure to read and follow the instructions, which can be downloaded from the same page. There are two different addresses to mail the form, depending on the location of the project. The two addresses are on the same website page.

Once you have submitted the form, your case will be assigned for investigation. An investigator may contact you if additional information is required. A public works complaint requires an investigator to obtain information from the public agency that awarded the project, review the employer's payroll, obtain additional records and interview witnesses. If a violation of prevailing wage law is found, the investigator will conduct an audit and issue a citation against the affected contractor. A notice will be sent to the public entity instructing the entity to withhold any payments that the public agency controls until the matter is resolved at an administrative hearing or 60 days after the issuance of citation if no appeal is requested by the affected contractor. All contractors have a right to appeal the citation, and the case may go before an administrative hearing officer appointed by the director of the Department of Industrial Relations.

Department of Insurance

The Department of Insurance has a help line for individuals reporting workers’ compensation insurance premium fraud leads: (800) 927-HELP. The department will want an "evidenced-based" lead. According to a department representative, having personal knowledge of premium fraud would be ideal. For example, if the person reporting the lead worked for a company and witnessed workers’ compensation cheating at that company, the department would consider the lead to be evidenced based and be would be very interested. On the other hand, if the caller lost a bid to another contractor whose estimate was so low that the caller suspected workers’ compensation insurance cheating by the competitor, such a lead generally would not be considered evidence-based, as the competitor could have made a calculation error in putting the estimate together.

Premium fraud does not include situations that involve employers with no workers' compensation insurance when they should have a policy. The Department of Insurance does not appear to be particularly interested in those leads. Those leads should instead be referred to the LETF.