Did you know that if California were a country, it would have the fifth largest economy in the world? It is also the entertainment capitol of the world and is very important in the grand scheme of the custom installation industry.
I moved to the outskirts of L.A. about three years ago and I found disturbing trends in contracting that raised questions and issues that seem to touch the very core of ethical business. California has always been a trendsetter, so I wonder if these are early indicators of problems that might soon affect the entire country.
With the constant skyrocketing home prices here, homeowners often cling to their homes like life rafts in a stormy sea. Why? When the home they purchased in 1990 has doubled or tripled in value, it means that buying a new home of similar value today would double or triple their real estate taxes. Why pay triple the taxes on a new home when you can remodel your existing home and keep your original tax base for the rest of your life?
Remodeling is a huge business here. Lots of remodeling has given birth to lots of small contractors. As I began working with some of them on updating my 30-year-old home, I was amazed at how the system works out here. I opened the yellow pages in search of a painting contractor. I met with several and requested bids and references, explaining that I would only consider a bidder with liability insurance. All of the bidders had contractors licenses. I looked over all of the credentials, chose one of them and asked for a certificate of insurance to be faxed to me.
The paint crew showed up for work on Monday, but I had not received the fax. When I spoke to the owner, he showed me the bond that California required and tried to pass that off as liability insurance. I knew better and pressed the issue.
He beat around the bush and said liability insurance was too expensive to carry, and that he had been a residential painting contractor for more than 10 years without it. I did not accept his response and asked if he had proof of workers comp for his employees. He didnt and I was not happy. We both knew that if a painter fell off his ladder and was injured, I was going to be liable. I didnt like that at all.
Welcome to California. Over the next four months of meeting with remodeling contractors for electrical, roofing, plumbing, cabinetry, flooring, etc., I had this same scenario present itself over and over again in similar fashion.
The electrical contractors ad boasted of 25 years in business locally. I called the number and asked for a quote to move two lights in my bathroom. The truck arrived looking very professional, but suspiciously clean and new. While working on the lights, the electrician asked me if I had a ladder. I accommodated his request, but thought to myself that I had never seen an electrician who did not have a ladder. When I asked how business was going, he explained that they had purchased this business and contractors license from an old electrician who had retired after 25 years. This was only their second month in business. Another funny feeling overcame me. It seemed that anybody who can write a check could be an electrical contractor in California.
Three months later I went to pick a color for the bathroom. I pulled up in the parking lot of the paint store and had to walk past 14 painters in the parking lot, all in their white outfits, standing next to their trucks. As I exited the store with paint in hands, they moved toward me and inquired, Are you looking for some painters?
The businessman in me realized that hiring my previous licensed painter was not much different than just hiring day laborers off the street. Two of these men could easily do the job in one day. How much? I asked. Later that day, I handed Juan and Armundo $125 cash, each. While I can do this as a homeowner, it would be illegal for a contractor.
This is why I am upset with Californias system. Thousand of businesses cannot function without illegal workers. Today, a contractor almost cannot compete without hiring illegal workersworkers without papers, without insurance, without wages and all of the normal payroll requirements.
The system virtually forces businesses to hire illegal workers and lie on their taxes. This breaks down the ethics of the whole system. This makes otherwise honest business owners criminals with something to hide. Lie about one area of your business and where will it end up?