We can’t prosecute our way out of staffing fraud. We have to prevent it

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OPINION – After more than three decades as a prosecutor in Los Angeles County, I’ve learned a hard truth: by the time law enforcement gets involved, the damage is already done.

I spent 20 years investigating and prosecuting fraud – much of it in the workers’ compensation system – and I’ve seen the same schemes evolve, rebrand, and resurface. The tactics are not new. What is new is the scale and sophistication of the schemes exploiting the vulnerability of California’s temporary staffing industry.

This is not an abstract policy debate. It is a growing enforcement failure with real victims: workers left without coverage when they are injured, legitimate businesses undercut by illegal competitors, and client business owners shattered when they discover they’ve been scammed.

During my recent testimony before the California Senate Labor Committee in support of SB 1032 (Reyes), I approached this issue from a simple premise: enforcement alone is not enough. We cannot prosecute our way out of a system that is structurally vulnerable to fraud.

Temporary staffing is, by design, a layered employment model. There are staffing agencies, client employers, employees, and carriers, all interacting in ways that can obscure who is actually responsible.

For legitimate operators, these layers serve a business purpose. But for bad actors, they provide cover.

In case after case, the biggest challenge isn’t identifying what went wrong – it’s identifying who is responsible. Businesses don’t act. People do. And when those individuals hide behind shell entities, nominee owners or shifting corporate identities, accountability becomes nearly impossible. Then, when fraud is detected, the “company” adopts a new identity, morphing into a different entity, often with the same people behind it.

Any serious inquiry into fraud begins with a basic question: what’s the lie and who made the lie? It’s a simple question that’s often hard to answer.  Until the people making the lies are identified, there is no chance of prosecution.

Enforcement is reactive – and overwhelmed. California’s enforcement agencies – including the Department of Industrial Relations, the Employment Development Department, and the California Department of Insurance – are staffed with dedicated professionals. But their resources are stretched thin.

Investigations take time. They are complex, resource-intensive and often multi-jurisdictional. As the investigation is pursued, the fraud continues to line the pockets of the bad actors while inflicting deeper and more costly damage to the workers and the client businesses.

Ultimately, when the dust settles, injured workers’ only hope is reliance on safety nets funded by the compliant. This is not a sustainable model.

The solution: The SAFE Act – legislation designed to establish baseline requirements that legitimate staffing companies already meet, to protect the entire system.

The bill shifts the focus from reaction to prevention by:

• Identifying the people behind the business. Ownership disclosure requirements ensure those with a financial stake are identified and accountable.
• Creating a public registry. Workers and client employers can verify whether a staffing agency is compliant before engaging with them. This alone is a powerful deterrent.
• Distinguishing legitimate operators from bad actors. Clear standards make it harder for fraudulent entities to hide.
• Requiring financial stability and providing safeguards. These provide a measure of protection for workers and employers.

California’s temporary staffing workforce includes nearly two million workers. That’s 10% of the state’s total workforce in industries from logistics to healthcare.

The bottom line: this is not overregulation. It is about basic integrity.

After 33 years in the justice system, I can say this with confidence: prevention is essential to enforcement.  You lock your doors and put on the porch light at night, right?

California has an opportunity to make that principle a reality. We should embrace it. .

Jennifer Lentz Snyder is the former head deputy of the Healthcare Insurance Fraud Division of the Los Angeles County District Attorney’s Office.