Irvine, CA – A new nonprofit trade association, the California Staffing Agency Reform Association (Cal-SARA), has been established by staffing industry leaders to clean up the current marketplace which is inundated with fraudulent and black market workers’ compensation insurance.
“The increasing demand for a contingent or variable workforce, combined with the decreasing supply of employees and workers’ compensation insurers, has allowed a massive black market to grow virtually unchecked. These illegal practices put staffing agencies, injured workers and California taxpayers at risk. Regulators have thus far been unsuccessful in policing these activities causing the situation to get worse,” says Mark Bertler, Executive Director of Cal-SARA.
Legitimate staffing agencies are forced to compete with scam agencies that do not operate with legitimate workers’ compensation insurance. Illegal operations drive prices down below the cost of doing business, creating an unfair marketplace. Customers of the California staffing industry have come to accept these illegitimate operations, largely due to the unfilled and accelerating demand for workers. Regulators appear to be playing “whack-a-mole” and cannot seem to shut them down as fast as they pop up.
Cal-SARA will provide education, training and legal support for its members, as well as providing assistance to regulators and insurers. Cal-SARA will also act to protect its members from illegal and unethical activity by aggressively pursuing all parties who enable these illegal arrangements, including brokers and PEOs.
A robust and inclusive committee structure will ensure that Cal-SARA’s mission and goals are advanced. These committees include industry leaders on their education, governance, audit, membership and litigation committees.
“Self-reform is the fastest and most reliable way to clean up our industry,” says Bertler. “Unethical and unscrupulous actors continue to destroy the market by blatantly utilizing illegal business practices without fear of sanction or punishment,” he explains. “The temptation to cross the line and operate in this emerging and dangerous underground marketplace is often too great. Once they stop paying for workers’ compensation insurance, they may also resort to payroll tax fraud as well. Cal-SARA is in the process of generating a war chest of resources and talent to put an end to these crimes,” he adds.
If these fraudulent activities continue to proliferate, it will become increasingly difficult to bring them under control. “We face the possibility of an environment where broad government intervention could punish the entire industry,” Bertler says.