Geno Caccia and I recently visited Sacramento to participate in a briefing by the Little Hoover Commission on California’s Underground Economy.
Like many business and political issues there is good news and bad. The bad news is that according to best estimates, California loses somewhere around $1.2 billion each year to the underground economy of employers paying workers in cash, withholding taxes or engaging in tax fraud. The good news is that Department of Industrial Relations (DIR) Director Christine Baker told the Commission that about 85 percent of employers move into compliance after receiving a warning letter from the DIR. So there is ample evidence that enforcement works.
The Little Hoover Commission, formally known as the Milton Marks “Little Hoover” Commission on California State Government Organization and Economy, is an independent state oversight agency that was created in 1962. The Commission’s mission is to investigate state government operations and – through reports, recommendations and legislative proposals – promote efficiency, economy and improved service. The Governor appoints five members of the commission, and the Speaker of the Assembly and the Senate Rules Committee both appoint two. Rounding out the membership are two sitting Senators and two sitting Assembly Members.
In its report, the Commission makes 15 recommendations to give competitive advantage to compliant businesses. One that stood out to Geno and me was on Enforcement. The Commission calls for improved enforcement efforts to reduce the scale of the underground economy, which has grown and thrived.
Having been at the receiving end of a taskforce investigation (which my company survived) I know enforcement can be a two-edged sword and can sometimes frighten legitimate business owners and contractors. After all, California’s myriad laws and regulations can be confusing at times and the last thing any business owner wants is to be hit with penalties for an innocent mistake.
But I am convinced that the PHC industry and its vast majority of legitimate, compliant contractors will benefit from enhanced enforcement aimed at putting the “cheaters” out of business and away from competing with you and me for work.
Which is why we left our subsequent meeting in Sacramento excited and with a new charge for the PHCC chapters in California.
After the Little Hoover meeting Geno and I then met with the State Registrar of Contractors, Cindi Chriestenson and the CSLB’s Chief of Enforcement David Fogt and Enforcement Deputy Chief Christina Delp. We discussed a variety of issues relating to licensure but the one that is at the core of my “charge” for PHCC is a program CSLB is piloting to team with local code enforcement officials to expand the activities of code officers beyond just enforcing building codes.
CSLB and the California Building Officials association have had a cooperative agreement for many years. The CALBO Board and the CSLB encouraged all Building Department personnel to “join in the effort to fulfill our common goal of establishing a cooperative state/local partnership aimed at identifying and resolving problems created by licensed and unlicensed contractors who:
- Perform shoddy work
- Disregard building codes
- Use deceptive business practices
- Misrepresent their license status, and/or
- Engage in the underground economy “
This well-intentions effort has had some challenges:
- Not all Building Officials support the effort
- There have been inconsistent reporting policies
- Some jurisdictions do not allow building inspectors to testify to code requirements
- Some City attorneys have demanded witness fees be paid when a subpoena is served
But recognizing the opportunities for collaboration, CSLB is now seeking individual operational agreements with “receptive cities and counties” and here is where PHCC can and should help.
There are some Cities and Counties that have executed a new MOU with CSLB to work together but CSLB wants our help – based upon our local chapter network – to identify building departments who are good candidates and recruit them to join in the pilot program. So here is what I am asking the local chapter officers and staff to embrace as a goal for 2015 and beyond.
- Adopt at a future local board meeting a resolution to support this program, identify a champion for the effort and identify one or more building departments that would be a possible partner with CSLB. (PHCCCA will provide a list of those agencies who have already signed up).
- Make contact with the regional CSLB enforcement chief and discuss those agencies you have identified in step one. Agree with CSLB on one or two agencies to approach.
- Reach out, with CSLB, to these agencies to explain the program and how it works.
- Engage the elected officials with jurisdiction for the local building official and indicate the support of the PHC industry for this effort.
- Reach out to other contractor groups, builders exchanges and others about the program and importance of reducing the underground economy.
This is a vital effort for our industry to embrace and I challenge my friends in the PHC industry to make this a success.
President, PHCC of California
Owner, Barker & Sons Plumbing