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CA Firm Accused of Helping Firms Avoid Paying Workers' Comp
According to a
news release
on the lawsuit filed in Orange County Superior Court,
Brown said, “PacifiStaff developed a sophisticated scheme
whereby companies would fire their workers and rehire
them in fake corporations with phantom executives. These
illegal maneuvers enabled construction companies to avoid
state laws which require all employers to provide
workers’ compensation insurance.”
The news release said the California Department of
Justice opened an investigation into PacifiStaff after
receiving reports that a growing number of Southern
California construction companies were starting to drop
workers’ compensation for their construction workforce.
The companies improperly labeled their employees as
shareholding corporate executives to take advantage of a
labor code exemption which does not require workers’
compensation insurance for such executives.
During the investigation, the AG’s office said,
undercover agents attended PacifiStaff sales meetings
where representatives pitched an illegal scheme to help
construction companies avoid paying workers’ compensation
to their employees. On print advertising, in Internet
promotions, and during these sales pitches, the company
falsely stated that their scheme was approved by a
government agency.
The investigators found that construction companies were
advised by PacifiStaff to fire their construction workers
and rehire them as corporate officers of a sham
corporation. The construction workers were then given
executive titles and a single share of worthless stock in
the new corporation and were sent back to construction
sites – without the required workers’ compensation
insurance.
The AG’s office said PacifiStaff brushed off questions
about what might happen if a construction worker were
actually injured on the job. Investigators also found
that staff representatives engaged in the unauthorized
practice of law by offering legal advice without a
license.
The lawsuit seeks a $2,500 per violation penalty. The number of violations could be in the thousands.
A news report from Business Insurance says PacifiStaff denies the business model adopted by its clients in any way “constitutes an unlawful or unfair business practice violation.” PacifiStaff said in a statement employers that adopt their business model do not “seek to avoid their obligation to provide meaningful benefits to their workers,” and Californians have “benefited” from their business model, according to Business Insurance.
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