The staffing industry in California is rife with fraud, according to groups fighting for better regulation.
California has the largest temporary staffing market in the U.S., with hundreds of thousands of temps and billions in annual revenue, yet it remains largely unregulated.
Jennifer Lentz Snyder, a retired prosecutor representing a nonprofit called the Partnership Organization for Workplace Ethics and Reform, said shady staffing companies present employers with fake workers’ comp insurance certificates. They pay off workers who get hurt but it is often not enough to cover medical bills.
“If you have a long-term injury, you don’t get the care that workers comp would provide,” Snyder explained. “For most people, those kinds of expenses are almost impossible to manage. The costs of care are enormous.”
Sometimes the fraudsters simply disappear and reopen under another name. The fraud allows them to charge very low prices, which puts legitimate companies at a huge disadvantage and causes insurance rates to go up. Experts estimated staffing-related fraud and payroll tax evasion in California cost taxpayers and businesses up to $2 billion per year.
Snyder supports a new bill currently before the U.S. Senate Labor Committee, called the Staffing Agency Fair Employment Act. It would require mandatory registration alongside proof of insurance and financial capacity.
“It requires a staffing company to pay a registration fee to provide the names of their principals, of anybody that has a financial interest in the staffing company, to identify the industries that they’re going to be working in, and to provide proof that can be verified of proper insurance in place,” Snyder outlined.
The bill would allow employers to confirm the legitimacy of a staffing company before hiring them. Staffing agencies would have to pay a $5,000 fee to register, which would cover the cost of administering the program.
