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Labor

Herculean Effort Needed Against Scofflaws

October 15, 1986|HARRY BERNSTEIN

There is an astonishing amount of fraud and deception nationally--and especially in California--as a result of employers' efforts to get labor more cheaply than the law allows, workers' attempts to avoid taxes and endeavors by illegal aliens to avoid deportation.

Cleaning up the mess would require a Hercules, who miraculously cleaned King Augeas' stables in one day by diverting a river through the excrement left by 3,000 oxen over 30 years.

Stabs are being made constantly at the task of enforcing federal and state laws that are supposed to protect workers against exploitation and make sure that all Americans pay their share of taxes. At best, however, the efforts are feeble, certainly not Herculean.

And an increasing number of critics charge that the problem of such labor and tax fraud is becoming worse than ever, because the administrations of President Reagan and of many state governors, including George Deukmejian, are increasingly lax about enforcing labor fraud law.

Committees of both the state Senate and Assembly are conducting a series of hearings on allegations of inadequate enforcement of labor laws. Both report substantial evidence to support the accusations. Referring to the massive underground economy, Assemblyman Richard E. Floyd (D-Hawthorne) said:

"There are thousands of businesses dealing strictly in cash, failing to report these transactions for tax purposes, paying no income tax, no sales tax and no withholding taxes for employees. This widespread cheating means most taxpayers and businesses have to make up the lost revenue.

"Honest businesses cannot compete against these dishonest employers, and we want to find out why state agencies are not pressing down on the dishonest ones."

Also, a joint labor-management committee in the painting industry filed suit last week in San Francisco Superior Court accusing the state Department of Industrial Relations of refusing to move against employers on public works jobs who violate labor laws.

Robert Simpson, chief deputy director of the Department of Industrial Relations, said the suit was outrageous and based on false arguments. He said he might seek court action against those who filed the suit because it was "frivolous."

However, similar complaints have been made out of court by other joint labor-management committees in the construction industry.

The most widespread labor-law fraud goes on in the underground economy, which is also known as "working off the books." The magnitude of the underground economy has been estimated at well over $300 billion a year.

In California, the state's Little Hoover Commission has estimated that the total is more than $40 billion and results in a $2-billion-a-year loss in tax revenue.

Drug dealers, burglars and others who operate in the underworld are part of the underground economy. But the large majority are ordinary, if dishonest, citizens who pay--or are paid--"under the table," usually in cash.

Employers thus avoid paying the minimum wage and escape other worker-protection laws, payroll taxes, union wage scales and other costs, while workers escape payment of income and Social Security taxes.

No less pernicious, but less massive, are the cases in which employers keep false payroll records, cheat by refusing to pay workers the wages they are due, fail to pay overtime rates for overtime work, hire children for adult jobs or do not pay workers' compensation or unemployment insurance taxes.

Violations of labor law are particularly serious in California because of the large number of illegal aliens who, desperate for jobs and fearful of deportation, are willing to work for sub-minimum wages, "off the books" or otherwise in violation of the law.

U.S. citizens and others here legally are finding it hard, if not impossible, to compete for some jobs with those here illegally unless they, too, are willing to work for employers who flagrantly violate state and federal labor laws.

Employers and employees who work "off the books" or violate other labor laws are playing "enforcement roulette." Knowing that the chances of being caught are small and that the punishment is usually light, they ignore the laws, hurt workers and avoid paying billions of dollars in taxes.

Charged with enforcing California's laws that are supposed to prevent all of these forms of corruption is Lloyd W. Aubry Jr., the Deukmejian-appointed state labor commissioner. In a report issued three weeks ago, Aubry said the number of citations issued for violations of labor laws in the past fiscal year had increased 24% over the previous year.

In the same period, the department issued 27% more citations to those who commit fraud by paying cash "off the books," he said. This resulted in penalties of more than $2 million, he said.

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