Flash Report: Employers Warned about MEWA by Labor Commissioner

The California Labor Commissioner is warning employers doing business with American Labor Alliance (ALA), and its alter egos that those who think they have workers’ comp coverage through the MEWA in fact do not have legal workers’ comp coverage. It says employers who purchased “insurance” from American Labor Alliance and CompOneUSA are warned that these companies are not licensed in California. Other associated tradenames identified by the California Department of Insurance include Omega Community Labor Association and Compass Pilot.

“Employers who think they have coverage with American Labor Alliance or through CompOne do not have valid workers’ comp insurance in California,” said Erika Monterroza speaking for the Labor Commissioner.  Employers using the MEWA are not meeting the statutory requirement to have workers’ compensation coverage.  “They could be issued a stop order mandating that they cease employee labor until they obtain proper workers’ compensation insurance and could also be subject to other penalties,” she warns.

CDI, which issued multiple cease and desist orders against the organization, also found last year that ALA shifted its accounts to Omega and the Compass Pilot product to avoid state enforcement actions. The new organizations are based on the same rejected legal theories and also are not licensed to transact insurance in California.

What & Who the MEWA Sold

American Labor Alliance and its top executive Marcus Asay sold a purported alternative to workers’ comp coverage under the tradename CompOneUSA. They began by targeting farm labor contractors and employers in other high-risk occupations. It reportedly covers around 300 employers and 7,000 workers. The Department of Industrial Relations stopped accepting Farm labor contractors certificates of insurance if there were from ALA.

A review of the customer list by Compline revealed that ALA’s customers include employers in such industries as specialty contractors, trucking, janitorial, manufacturing, restaurants, plastic injection molding, staffing, tax services, and many other types.

CDI and US Attorney Actions

The MEWA has contended, despite a series of state and federal government actions, that it is above California law insisting it comes under federal law. But a federal court has ordered the MEWA and its executives to stop selling the product through any organization or name.

The organization was ignoring multiple cease and desist orders and was recently fined $4.3 million by the California Department of Insurance for illegally selling its so-called alternative to workers’ comp insurance. Federal prosecutors last month issued criminal indictments against the company and its key executives for fraud and other alleged criminal acts.

ALA marketed the product as being exempt from oversight by the California Department of Insurance. ALA claimed to be a labor union operating under ERISA rules, but a California administrative law judge found otherwise, and the United States Department of Labor sent a letter stating that they were not certified.

The Labor Commissioner’s statement linked to the California Department of Insurance’s announcement of the $4.3M fine. It pointed out that employers must have valid workers’ comp coverage or face being shut down and fined heavily.

Employers operating without workers’ comp coverage are subject to stop work orders from the Labor Commissioner and face penalties of $1,500 per employee. Additionally, employers that violate stop work orders can be fined $10,000.

Following an FBI raid and a grand jury investigation, federal prosecutors filed indictments against ALA, Asay and Antonio Gastelum who filled a number of key financial positions for the organizations. The charges include conspiracy, mail fraud, and money laundering. The indictment maintains that during one 12-month period the scheme brought in at least $2.8 million in premiums for the purported workers’ comp coverage and another $770,000 in payments for an allegedly fraudulent pension plan. Federal officials say the proceeds were used for personal use by Asay and Gastelum and to pay business expenses.

Workers’ Comp Executive has been investigating this sttory since 2016. See all of our coverage here:   https://www.wcexec.com/investigations/mewa/