State enforcement efforts ramped up against California businesses that deliberately operate in the “underground economy” by not complying with state contracting, insurance and payroll requirements.

Dave Jones, California’s Insurance Commissioner, said that “Operation Underground,” a series of sweeps at construction sites suspected of illegal operations, resulted in 104 enforcement actions. 

Investigators issued enforcement actions for violations including:

The California Department of Industrial Relations (DIR) announced the launch of a new task force to “combat the underground economy.”

The Labor Enforcement Task Force (LETF) will be made up of personnel from the Department of Industrial Relations, the Employment Development Department, the Contractor’s State License Board, the Board of Equalization and the Bureau of Automotive Repair. 

The LETF was created to crack down on businesses that do not follow the state’s labor laws — hiring employees off the books and paying them under the table.

According to DIR, businesses that operate underground may violate many laws, including not paying income taxes, unemployment insurance or disability insurance; not carrying workers’ compensation coverage; not paying proper wages; and not registering for required licenses and permits.  

“These underground operations subsequently pay lower overhead costs which give them an unfair competitive advantage over legitimate, law-abiding businesses,” the DIR said in a statement.

The DIR said the LETF was created to