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Contractors, Will Your Use Of Subcontractors Land You In Jail too?


Contractors, Will Your Use Of Subcontractors Land You In Jail too?

Contractor Sent to Jail for workers comp fraud


Being a contractor is no longer an amateur sport.  Due to government regulations and laws a contractor can get into serious trouble if he or she is not following the rules of law.   Even if you were ignorant of those rules, the government will still hold you accountable to the legal responsibilities you must accept if you run a residential construction or remodeling business.  A few weeks back I shared how a GC and his subcontractor both got fined for not following the EPA’s RRP rule on the same job due to an anonymous tip.   Between the two businesses they could end up paying about $120,000.00 in fines.   In this blog article I want to make you aware of a contractor who may just go to jail for purposely cheating regarding workers compensation.


The facts

The owners of Triple Star Roofing in Wood County Ohio were recently found guilty of fraud for failing to report their payroll to the Ohio Bureau of Workers' Compensation.  Like the RRP violations mentioned above, their business was investigated after an anonymous tip.   During the investigation bank records were analyzed for the 2004 to 2008 time period.  The investigation found that checks were issued to the same individuals on a weekly basis with many of them indicating “payroll” in the memo section.  As a result the company owners now face possible prison terms of one to five years and fines of up to $10,000.  Additional charges are still pending for the 2009 to 2012 time periods.  I am sure you would agree, they are feeling a world of hurt and are probably scared as hell.

Ohio Bureau of Workers Compensation“Schemes like this to avoid paying premium undermine the purpose of workers’ comp insurance – to protect workers who are injured on the job – and will result in unwanted attention from our investigators.”

Steve Buehrer, Administrator/CEO, Ohio Bureau of Workers’ Compensation (BWC)


What about you and your business? 

Are you operating illegally to save money and or to be the lowest bidder?  How would you answer the list of questions I pose below?  I don’t know the laws in your location, but remember, if you were in Ohio, and answered yes to any of them, you too might be facing jail time if you get caught.

  • Are you paying employees “under the table” to avoid paying payroll taxes or workers compensation premiums?
  • Are you treating employees as subs to avoid paying payroll taxes or workers compensation premiums by giving them 1099’s?
  • Are you misclassifying workers to put their payroll into a lower cost workers compensation rate?
  • Are other legal and legitimate contractors frustrated that you are stealing work away from them?

These are some of the reasons the owners of Triple Star Roofing are facing potential jail time.   I wonder how their families are doing while they all wait to see what will happen.


So let’s just say you get caught, have to pay fines, but don’t actually have to go to jail.  

ohio contractor goes to jail for fraudHow would you look at that?   I know one contractor who had that happen to him.  When I asked him about it he told me he was definitely scared about going to prison so he spent big money to hire a good lawyer to try to keep him out of prison.  He said the lawyer was successful but he was definitely sweating it right up until the final verdict.  He didn’t get any jail time but did have to pay a lot of money in fines.  He also told me that when everything was said and done, and based on all the money he saved over the years by cheating, the fine and lawyer fees were far less than the money he saved.  He told me he felt it was worth the risk.

I then asked him if I asked his wife and kids if they thought it was worth it what their response would be.  He told me he had never thought about that…

Read More Here



I would estimate that 99% of roofing companies violate the law in these areas. I can tell you from experience that the costs involved in operating by the book are exorbitant. However, when I make a presentation, and give a brief comment covering the benefits a client can expect by using a contractor who is properly licensed, insured, and certified - and is following the rules with workers compensation insurance, I usually have no problem with my higher price. If a GC hires a sub, and either of them is not properly covered, if there is an accident, the homeowner may well be liable as well.
Posted @ Tuesday, August 27, 2013 5:32 AM by Pete Curtis
Unfair and unjust laws deserve no obedience. However, if you are going to risk breaking the law then you need to be careful about it. Usually if the worker also performs work for other companies than yours you are OK on calling them a sub. Never indicate their payment check is payroll. It is not.
Posted @ Monday, September 09, 2013 4:18 PM by Steven Shepard
Your advise doesn't fit with those who are professionals. I respect your opinion, and on my site you are entitled to it. But suggesting to break laws because you disagree is not good advise or a professional business practice I recommend others follow...
Posted @ Monday, September 09, 2013 4:29 PM by Shawn McCadden
Sorry, grammar alert! I meant advice!
Posted @ Monday, September 09, 2013 4:30 PM by Shawn McCadden
In the latest California State Licensing Board's Publication they openly state “about 60% of active CSLB Licensees claim a worker compensation insurance exemption" TheE CSLB is are do more enforcement and I hope to see this number decrease.
Posted @ Monday, September 09, 2013 8:26 PM by bob
WOW! This is 2013 and you are still asking those four questions? Why oh Why does this continue to be such a pathetic industry?  
Why do I still have to "justify my price" when out of ten estimates, there are only 2 legal ones the customer will receive?
Posted @ Thursday, September 19, 2013 5:18 PM by Tom Williams
Tom, Great questions. Who do you think should have to answer them?
Posted @ Friday, September 20, 2013 6:31 AM by Shawn McCadden
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