Recently, the Contractors State License Board’s Statewide Investigative Fraud Team performed a two-day sting operation, in which agents posed as homeowners and solicited bids. According to the CSLB’s press release, the result was over 100 people caught violating the law in various ways, including not carrying workers’ compensation insurance for their employees.

On the surface, this might appear relatively harmless, but it isn’t. Even though the injured employee could go after his uninsured employer, there lies an additional danger to the home-owner. Part of the requirement of being a licensed contractor in the state is having workers’ compensation insurance for your employees. When the contractor is underinsured or has obtained workers’ compensation insurance through fraud, he stops being a licensed contractor.

So the nice gentleman you hired to put his crew to work fixing your house is, suddenly and without your knowledge, your employee. And his employees have become your employees too. Now, in the unfortunate event of one of the workers sustaining an injury on the job, YOU are the uninsured, on-the-hook employer.

In other words, this isn’t some government annoyance like the shaking down of an “unlicensed” lemonade stand. This type of insurance fraud carries very serious and direct consequences for ordinary consumers, one which can not be spread around as a cost of doing business.