Home > workers compensation compliance > Prime Contractors Gaming the System Passing Along Their WC Liabilities: Carpet Installers

Prime Contractors Gaming the System Passing Along Their WC Liabilities: Carpet Installers

You may have figured out from my Tweet and Linked-In comments today, I have a pet peeve against workers’ compensation and unemployment insurance auditors that look the other way when told not to prosecute fraudulent prime contractors.

One simple reason is the quotas the auditors have to maintain to keep their jobs. So, the easiest targets are sole proprietors and LLC partnerships. They don’t keep accurate records, have not a clue as to their compliance reporting requirements, and are surviving in the underground economy.

One such case was for Sasha’s Carpet Service LLC. He thought having friends becoming partners would keep him from paying workers’ compensation premiums. But in 2008, Washington State revised their definition of an independent contractor to include small companies working for one prime contractor. All the LLCs went back t sole props.

How this revision worked for the Sasha was to pick to up the carpet, linoleum, tile, etc. in his van and then his former partner buddies would jump into the truck when it left the prime contractor’s warehouse. Sasha became an Unregistered Employer. Remember, this is piece work compliance. His records showed he was making $60/hour when the norm was $3.00 a yard installed.

But according to the 2008 independent contractor revision, Sasha should not have been audited. The prime contractor distributor should have been audited for hiring covered workers. This particular national prime contractor did not have installers or salesmen—just office employees. I picked up some business cards at their warehouse that were blank except for the salesmen to write in their names above a line that said ‘Customer Representative”.

Poor Sasha got fined the usual $8000 for a one year audit. By the time I found all the underground installers working for the ‘coyotes’, I tried to assess the prime over $3,000,000. This audit was buried. Something to do with campaign contributions was my guess.

To be an underground independent contractor, there are still ways to work with the ‘system’. One is simply to work for more than one distributor or prime contractor. Another is to have a workers’ compensation account and pay for any occasional helpers.

Call us if you need some advice or want to know more. http://bit.ly/VuTNwg

In the meantime, keep track of our ‘partners’ using this FREE iPHone device: http://bit.ly/165DR6D

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