on the cover / By Heidi Walters

Mainstay Unraveled

Lawsuits and accusations linger after the Blue Lake Rancheria quietly closed its staffing company

(Dec. 8, 2011)  One morning in April, nine employees of Mainstay Business Solutions arrived at the company’s corporate headquarters, a modern, glassy building not far from Kikkoman Foods Inc.’s soy sauce factory in Folsom, Calif. The doors were locked, and their keys no longer worked. There was no sign on the door. They waited outside for a couple of hours, until finally someone opened the door from the inside. It was a supervisor.

“He said, ‘We’re no longer in business,’” recalled Gary Bekowsky, an information technology specialist who was among those waiting. The supervisor said he was sorry, and that everyone was in the same boat. “And he handed us a pamphlet on how to collect unemployment.”

Wild Planet Foods, owned by Bill Carvalho, used Mainstay workers on its docks in Eureka, Crescent City and San Mateo. PHOTO BY HEIDI WALTERS

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The irony is difficult to overlook. Mainstay, an employee leasing company owned by the Blue Lake Rancheria in Humboldt County, has been wrangling with the California Employment Development Department almost since its founding, most recently over $19 million in unpaid state unemployment taxes, penalties and interest that the EDD said have accrued since 2009. The unresolved dispute led to the company’s decision to shut down after the state, in early April, levied its bank accounts and operations, and recorded tax liens in 13 counties.

On the day it closed, Mainstay had 6,600 employees leased out to hundreds of client companies. About 150 people worked in its 15 corporate branches throughout California, including one here in Humboldt County at an office in Blue Lake and about 50 at the office in Folsom. (Most of them had gotten word about the closure the night before it happened.) Locally, Mainstay provided about 50 seasonal and a handful of full-time hires in McKinleyville-based Wild Planet Foods’ seafood processing operations in Eureka, Crescent City and San Mateo. Other local Mainstay employees worked for Cox and Associates, Pierson Co. and Blankenship Construction. Some of these workers noticed only that they were suddenly getting their paychecks from a new staffing agency. Others lost their jobs, their benefits and their final paychecks. Mainstay’s client companies had to scramble to pay their workers and make new arrangements for handling the staffing, payroll and other human resource functions that Mainstay had done for them.

The aftermath of Mainstay’s sudden departure now is playing out in court, adding another twist to the tangle of lawsuits and legal disputes the Blue Lake Rancheria has had with state and federal agencies ever since it founded the company.

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The 53-member Blue Lake Rancheria formed Mainstay Business Solutions in 2003 with the idea that it could save employers money on workers’ compensation costs, while turning a nice profit. As a federally recognized tribe, the Rancheria figured it could use its own, much cheaper workers’ comp plan to cover employees and then lease those workers to companies all over the state.

The business took off, and soon Mainstay was leasing tens of thousands of employees to companies throughout California.

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