Legislature tackles construction’s ‘underground economy’
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30 Apr 2008
- Last Updated on Wednesday, 30 April 2008 08:50
- Published on Tuesday, 29 November -0001 16:00
- Written by Kelly Walsh
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In 2007, the Washington Legislature created a task force to help formulate state policy addressing the so-called “underground economy” of the construction industry. The Legislature sought to increase oversight of the construction industry to ensure unlicensed contractors are held accountable for failure to comply with state registration requirements.
In 2007, the Washington Legislature created a task force to help formulate state policy addressing the so-called “underground economy” of the construction industry. The Legislature sought to increase oversight of the construction industry to ensure unlicensed contractors are held accountable for failure to comply with state registration requirements.
After just one year in existence, the task force proposed a number of measures to crack down on unregistered contractors – most of which were enacted into law on March 21, 2008.
What’s new
Among the more interesting provisions of the new law is the requirement that the Department of Labor and Industries create an expanded social marketing campaign aimed at warning consumers of the risks and potential consequences of hiring unregistered contractors. This campaign will likely include an increase in public service announcements focused on encouraging the public and properly registered contractors to report suspected fraud.
In addition, the law now requires contractors applying for registration to submit a unified business identifier number. If no UBI number is provided, L&I must deny the application. A related requirement obligates the department to suspend a contractor’s registration if it discovers that a currently registered contractor does not have an active certificate of registration with the Department of Revenue.
Finally, a contractor’s registration will be suspended if it falsifies information on its registration application.
Consequences of noncompliance
Contractors who violate these new provisions – along with requirements delineated under the prior law – can be subjected to some tough penalties. One of the more serious consequences prohibits a contractor from bidding on any public works project in Washington for a year if he or she commits two violations of any of the following within a five-year period: willfully violating contractor registration laws, knowingly misrepresenting payroll or employee hours to L&I, failing to maintain certificate of coverage under industrial insurance requirements, or violating the contractor registration laws.
In addition, any contractor who submits false information in a registration application can be subjected to penalties up to $10,000.
More enforcement on the horizon
When Gov. Chris Gregoire signed the bill into law in March, she also vetoed a number of provisions that would have provided additional funding for enforcement activities. The original bill would have required both L&I and the Employment Security Department to hire more staff for enforcement of these provisions. Additionally, funding would have been dedicated to the Office of the Attorney General for prosecuting contractor compliance cases.
While these funding provisions were removed from the bill, the governor’s comments on the veto include direction to L&I to hire additional investigative staff in its fraud and audit team so that the law may be appropriately implemented.
In addition, the task force will meet until the end of 2008 in order to provide further recommendations to the Legislature in upcoming sessions.
All told, these new laws should be helpful to those contractors who are properly registered. By providing tools to both L&I and ESD to crack down on the “underground economy,” the Legislature assists all of the above-board contractors in securing additional work and reducing the number of unregistered contractors competing for that business.
Kelly Walsh is an attorney in the Vancouver office of Schwabe, Williamson & Wyatt. She can be reached at 360-905-1432 or This email address is being protected from spambots. You need JavaScript enabled to view it. .
