Are You a Target?

“I know another small business owner who received a “stop work” order from the state. Why would small companies be targeted?”

Your HR Survival Tip

While neither the state nor federal governments previously spent much time or money going after small companies, it doesn’t mean you’re safe to do whatever you want. California doesn’t exactly bombard you with information about employment laws and tax codes when you register your business but that doesn’t mean you aren’t expected to follow them and be compliant.

Recently, several CA agencies decided to work together and target the “underground economy.” Businesses in this underground economy are hiring workers and paying them under the table (cash), aren’t following employment laws or tax codes, may not have the required business or contractor licenses, may not be following safety standards, or don’t protect the worker by adding them to a workers’ compensation insurance policy.

When you’re not compliant, it typically means the workers’ comp carrier isn’t receiving as much money for the policy as they should; CA isn’t getting the state tax money from payroll or the disability deduction; IRS isn’t getting payroll income tax or Medicare money. Plus, these companies often have a competitive edge because their (current) costs are lower than those of companies who are compliant.

So these multi-agency enforcement teams are visiting businesses. Yes, they just walk around, step into a business, and start asking questions. The goal is to both educate business owners and issue citations to companies out of compliance. Their initial focus has been on security firms, construction sites, home design, tree services, moving companies, HR-related services, restaurants, e-waste companies, retail stores, and limousine and charter bus companies. Overall, a wide variety.

The teams started their visits throughout the state less than 2 weeks ago and already 20 businesses have been found with violations and received citations and penalties or were referred to another agency for an audit. If a business doesn’t have the required licenses or workers’ comp insurance, they’ve received a stop work order. This mean you have to stop work immediately and stay closed until you are able to clear things up and pay the fines.

Thus far, in San Diego, three construction companies have been visited by “the team.” Only one escaped with no violations. The other two were cited for over a dozen violations. While we might expect safety or employment law violations, one company was also cited for illegal advertising.

It’s very tempting to try to save money while growing your business. And you might even pretend ignorance of the law is a defense. However, if you want to grow a business where more money will go into your pocket than into your attorney’s, you need to play by the rules… and California has a bunch of them. So, yes, you just might be a target!