On the wall of nearly every workplace break room are documents reminding employees of their labor rights, workplace safety regulations and various other employment notices required by federal, state and local governments.
These signs rarely warrant a second glance for most workers, but they’re the subject of a new lawsuit filed Wednesday in San Francisco Superior Court by the City of San Francisco against Personnel Concepts Inc. and its parent companies, which make and sell these compliance posters.
San Francisco alleges that the companies impersonate government agencies to trick small businesses into purchasing their products, threatening potential fines if they don’t comply. The lawsuit aims for an injunction to stop deceptive practices, restitution for defrauded businesses and civil penalties against the companies.
“Owning a small business is already hard enough. These types of scams make it even more difficult,” City Attorney David Chiu said in an interview. “These postings don’t even include all the required information so the small businesses are harmed alongside workers who are not being informed of all of their rights.”
According to the complaint, the compliance companies regularly send out mailers that appear to be government-issued invoices for an “All-on-One California & Federal Labor Law Poster” to small businesses across California.
The lawsuit accuses the companies of using similar designs to official government documents and threatening potential fines of up to $37,513 by misrepresenting themselves.
What’s more, the lawsuit says the product itself doesn’t actually contain all the required postings for California employers such as paid sick leave notices, meaning businesses remain out of compliance and employees are not being informed of all of their rights even after purchasing the poster.
The notices also claim the product is an “exclusive Library of Congress-registered poster”—a designation that does not exist, the lawsuit alleges.
The lawsuit details that businesses that ordered posters were then subject to “aggressive and deceptive telemarketing calls” meant to pressure them into buying expensive subscription services. When businesses refuse to pay or decline the services, a collection agency is engaged to demand payment according to the complaint.
Although it’s legal to sell compliance posters, government-issued posters required to be displayed can be downloaded from government websites for free.
Small business owners in California are often targets of these types of scams because of the sheer volume of new workplace-focused laws that the state passes, according to Sharky Laguana, the owner of van rental company Bandago and a small business advocate.
Laguana said he and his employees are regularly inundated with workplace compliance sales inquiries, many of which impersonate government communications or are presented as invoices.
“What makes this particularly pernicious is that this company is taking advantage of that situation, scamming small business owners and trapping them in a cycle of unwanted actions,” Chiu said.
The city’s lawsuit is part of a larger customer protection initiative from the City Attorney’s Office that includes a consumer protection hotline and a web portal for people to report instances of businesses deceiving or defrauding consumers, as well as property owners that violate housing laws.
“I hope that this leads to future legal actions that we can take to address these issues and make things fair for consumers,” Chiu said, highlighting a lawsuit that his office brought last year against an individual allegedly providing fraudulent immigration services.
Kevin Truong can be reached at [email protected]