State pursues Anaheim firm

Times Staff Writer

A Southern California staffing company was sued Tuesday by the state, which accused the firm of helping building contractors evade a legal obligation to insure workers against on-the-job injuries.

It was the second company in two weeks to face legal action from Atty. Gen. Jerry Brown as part of a campaign to go after suspected deadbeat employers and rein in what he calls “the underground economy.”

The complaint charges the staffing company, Anaheim-based PacifiStaff, with marketing “an unlawful scheme” to contractors so they could avoid paying state workers’ compensation insurance as required by law.

The staffing company denied wrongdoing, and a PacifiStaff attorney described the company’s program as a legitimate alternative to traditional workers’ compensation insurance.

According to the state, the staffing company exploited a provision in state labor law intended for small family-owned or closely held businesses. The law exempts owners of the firms from having to buy workers’ compensation coverage for themselves.


But in this case, the state contends, the staffing company offered to show contractors how to set up corporations and give employees nominal ownership stakes. The arrangement, the firm claimed, would free the contractors from having to pay workers’ compensation premiums.

PacifiStaff markets its program at as “the antidote to workers’ compensation.”

Company lawyer Heywood Friedman contends that under PacifiStaff’s plan the workers would become employee-owners, who voluntarily give up their rights to be covered by workers’ compensation insurance. In turn, they get better benefits under an alternative health plan, he said.

The company claims in marketing presentations that companies with payrolls totaling over $70 million in current payroll use such alternative insurance programs, the attorney general’s office said.

Brown, however, said companies such as PacifiStaff help employers exploit workers and unfairly compete with law-abiding firms, which provide workers’ compensation insurance coverage and pay minimum wages, overtime and unemployment and disability insurance on behalf of employees.

“Construction work can be extremely dangerous, and those workers injured on the job deserve and depend upon benefits afforded by California law,” Brown said at a news conference in Los Angeles. “Today’s lawsuit sends a strong message that employers who try to short-circuit the system will be prosecuted to the full extent of the law.”

Under current law, workers whose employers do not provide workers’ comp coverage must seek payment for medical bills and disability benefits from a special state fund. The state, in turn, seeks reimbursement from law-abiding employers in the form of surcharges on their semi-annual premiums.

Brown’s lawsuit is part of an ongoing effort to protect workers from alleged corner-cutting employers. Last week the attorney general sued Brinas Corp., a Downey drywall contractor suspected of not paying minimum wages, overtime, payroll taxes and workers’ comp insurance.

Brown is suing both companies under California’s powerful Unfair Competition law and other statutes. If he prevails, the state can collect $2,500 per infraction for potentially thousands of cases involving individual workers. Losing defendants could also be required to return prior profits and be subject to a legal injunction against continuing to operate illegally.