Herculean Effort Needed Against Scofflaws

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.

But Aubry’s critics charge that the Deukmejian Administration is soft on violators of labor law, and they challenge the accuracy of his figures. Even if Aubry’s critics are wrong about the statistics, the figures can hardly be called, as Aubry described them, evidence that “the continuing effectiveness of our field enforcement ensures that labor law violators won’t go unpunished.” The efficiency of the enforcement system also ensures that “employees receive all the protection due them under the labor laws,” Aubry said.

In fact, actions against labor-law violators touched only the tip of the iceberg in California’s $40-billion-a-year underground economy. And an ever-increasing number of charges are made by workers against employers who have allegedly violated the labor laws.

When asked if he truly believed that state labor law enforcement was so effective that it ensured that violators won’t go unpunished, Aubry conceded that it was not. He compared the role of his department to that of the police. Even when the police are doing a good job, not all crime is eliminated, he said.

There are only about 200 officers enforcing labor law in California, and they are expected to police about 400,000 companies. The number is hardly adequate to deter violators.

Assemblyman Floyd has charged that Aubry’s statements claiming success in catching labor-law violators are based on “phony statistics.” Floyd said the state labor commissioner’s office was “hopelessly backlogged with hundreds of cases.” A recent study, he said, provided an example of the problem in just one area: “Wage claims by workers who have been stiffed (cheated out of their wages) by their bosses take nearly a year to be processed by the Deukmejian Administration.”

Labor-law fraud and tax evasion have existed for years during both Democratic and Republican administrations, and all fraud is not going to be eliminated. But it might be curbed by increasing, not cutting, budgets for state and federal labor-law enforcement officers, as has been done.

It would also help to impose heavier penalties against violators. And the agencies involved might help with a campaign to increase public awareness of the tremendous size of the problem--and of the cost that labor-law fraud imposes on honest taxpayers, employers and workers.

Thompson Endorsed

When the nation’s top union leaders meet annually in Bal Harbour, Fla., the amiable Illinois Republican Gov. James R. Thompson often is there, renewing old friendships and making new ones. Thompson helped enact such measures as a law giving public employees collective-bargaining rights, including the right to strike, except when public health or safety is endangered.

Such pro-labor positions and his many gestures of good will toward unions have won him the endorsement of most unions in his reelection bid despite labor’s traditional endorsement of Democratic candidates.

Thompson’s rival, former U.S. Sen. Adlai E. Stevenson III, is running as the candidate of the newly formed Solidarity Party, which was created because Stevenson refused to run on the same ticket with followers of the political extremist Lyndon H. LaRouche Jr. The unions didn’t like Stevenson’s votes against the federal government guarantees of loans to the Chrysler Corp. or his opposition to their campaign for import restrictions.

As of now, Thompson’s victory seems assured. It might have been even without labor’s help. But the unions’ endorsement could well make it a landslide, compared to his 5,074-vote margin over Stevenson out of more than 3.6 million votes cast in 1982.