Contractor who Failed to Accurately Report Employee Wages to Its Worker’s Compensation Insurer is Sentenced to Prison.

A roofing contractor’s criminal sentence of 10 years in prison and required payment of $500,000 to his insurer for under-reporting payroll (and underpaying premiums) to his Worker’s Compensation Insurance Company was recently affirmed by the California Court of Appeal in San Diego.

The insurer for Petronella Roofing discovered the two different sets of fraudulent payroll books or accounts when comparing contractor’s monthly payroll reports to the Workers Compensation insurer with the wage withholding reports that the builder filed with the Employment Development Department.

The difference in payroll reported over eight years was several million dollars, which would have amounted to several hundred thousand dollars in Worker’s Compensation Insurance premiums.

Insurance Code § 11880 makes it a crime to fail to pay, or false reporting of sums due for, workers compensation insurance premiums.

The sentence was enhanced under White Collar Crime laws. And he also was required to pay $500,000 in restitution to the Worker’s Compensation insurance carrier for its premium losses.

Likely, mis-classification of an employee as an “independent contractor” or “subcontractor” could yield similar criminal and civil penalties.

In addition to prison terms and restitution orders, grossly under-reporting Worker’s Compensation wages can also result in the automatic suspension of the builder’s contractor’s licence under section 7125.2 (a) of the Contractor’s State License Board.

And if the license is so suspended by operation of law, the person who hired the contractor or subcontractor can bring a legal action per Bus. & Prof. Code § 7031 (b) for a refund of all money paid to that Contractor or subcontractor.

N.B. The contents of this Article do not constitute legal advice or create an attorney-client relationship, and you may NOT rely on it without seeking legal advice regarding your particular, unique situation from a competent California Construction lawyer or Employment Law attorney.
Please also note that factual situations vary, and statutes, regulations and case law are frequently changing and evolving, and these materials thus also may be or become outdated or incorrect.
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