There’s more to California’s $60 billion underground economy than sex and drugs. Some estimates show half the contractors in the state pay workers in cash, avoiding payroll and social security taxes. The Monterey Peninsula is a hotbed of unlicensed construction and landscaping activity, where Contractors State License Board investigator David Leary finds unlicensed crews operating daily. 


Based in Carmel, Leary drops in on work sites across his turf, which includes all of San Luis Obispo, San Benito, Santa Cruz and Monterey counties. He says Carmel and Pebble Beach are the epicenter of activity for violators. “If you don’t have to pay worker’s compensation, payroll taxes and licensing fees, you can undercut a legitimate contractor’s business,” Leary says.


Now, in a partnership with the Monterey County District Attorney’s office that Leary calls a “precedent for the state,” he has upped the number of notices to appear in court he distributes tenfold since 2009. 


For its efforts to prosecute unlicensed contractors on criminal charges, the DA’s worker’s compensation fraud unit was honored by the Contractors State License Board earlier this month. “Monterey County is taking this very seriously,” says Deputy DA Carol Reed, who prosecutes about 10 violations a month. A first offense can result in a day in jail, and a third offense up to a year. 


Licenses, which must be renewed every two years for $300, require four years of work experience, a background check, passing multiple-choice tests and $12,500 of insurance. 


Besides being ripped off by sometimes six-figure sums for shoddy work, “The dangers are too real,” Leary says. A recent Pebble Beach sting uncovered two registered sex offenders were part of an unlicensed contracting crew. “This is what you could be inviting into your home.” 


Projects done in violation of building code or to poor quality are routinely ordered torn down, ultimately costing the homeowner more. 


Assemblyman Bill Monning authored a bill requiring contractors to update worker’s comp exemptions every two years with license renewals. “The bill would protect workers, law-abiding employers and the public, as well as recapture lost funds to both the county and state’s general fund,” Monning says. The bill, which passed out of assembly April 14, is awaiting committee assignment in the senate. 


Ron Chesshire, CEO at Monterey/Santa Cruz Counties Building and Construction Trades Council, says tough times may be responsible for turning some contractors – once in good standing but having let their license or insurance slip – toward the underground economy. “When work takes a downturn, our [3,600] members have to pay their bills, they have to feed their families, they have to survive,” he says. “I would be heartless if I told you I would just penalize anybody to the fullest extent if I caught them working illegally.