Examination of Contractors' Business Practices Could Save Lives

SACRAMENTO, Calif., Nov. 3, 2011 /PRNewswire/ -- The California Professional Association of Specialty Contractors (CALPASC) sees non-compliance of California laws as an indicator of more than the obvious. In the example of Jose Luis Guerrero, owner of a tree-trimming business in Southern California, this proved to be the case. Guerrero underreported his payroll by millions of dollars to the California State Compensation Insurance Fund, scamming hundreds of thousands of dollars in lower premiums. Guerrero's unscrupulous behavior was discovered after he filed a workers' compensation claim for an employee's death in a wood chipper. Guerrero grossly underpaid his workers' compensation premiums and expected to have full benefits paid to the unfortunate employee's beneficiaries. Guerrero was arrested for workers' compensation premium fraud. "Contractors like Guerrero, who cheat when competing with legitimate contractors and expect them to pay inflated workers' compensation premiums to cover the cost of all claims, can't have it both ways," said CALPASC Risk Management Director Bruce Wick.

Contractors who intentionally purchase workers' compensation insurance at lower premium rates than required or avoid purchasing insurance entirely create an unfair advantage when competing with law-abiding contractors. Cost-shifting from the illegitimate to the legitimate contractors makes it hard for lawful contractors to bid competitively in the construction industry.

"If a contractor isn't willing to compete fairly, he/she shouldn't be allowed to continue in business," stressed Wick. "In this case, the workers' compensation fraud could have been detected earlier by the insurance carrier, and the contractor could have been kept from continuing operations."  

Quality construction work requires training, continual use of proper safety practices and workers' compensation coverage. Contractors who skirt the law and thrive in the underground economy ignore these requirements, and untold accidents occur that cause employees to be injured or lose their lives. In the case of someone like Guerrero, state taxes hadn't been paid, and payroll had been significantly underreported for four years. According to media reports, "Employees were denied the benefits of state unemployment and disability insurance."  

To assist in this effort, CALPASC established the LEVEL Program, which encourages coordination among state agencies, other associations and legitimate contractors to shine a spotlight and clamp down on cheating contractors.

"Unfortunately, the efficiency and coordination of efforts between insurers and the various state enforcement agencies have been behind the times," said CALPASC Executive Director Brad Diede. "We are encouraged by the efforts of agency chiefs to update their organizations and procedures to expedite enforcement against bad actor employers. Legitimate construction contractors and construction employees need these changes made and implemented as soon as possible."

Diede further stressed, "Contractors who cut corners and ignore safety and insurance requirements need to be called into question immediately. By apprehending these violators early on in 'their game,' legitimate contractors won't be disadvantaged, quality won't suffer and, most importantly, we can most assuredly prevent injuries and save lives."

The California Professional Association of Specialty Contractors is a nonprofit 501(c)6 trade association advocating on behalf of trade contractors and suppliers of building materials in California. CALPASC is committed to educating members on complex issues and advancing safety and compliance within the building industry.

SOURCE California Professional Association of Specialty Contractors (CALPASC)