BILL ANALYSIS
AB 2305
Page 1
ASSEMBLY THIRD READING
AB 2305 (Knight)
As Amended April 22, 2010
Majority vote
BUSINESS & PROFESSIONS 7-2 APPROPRIATIONS 17-0
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|Ayes:|Hayashi, Emmerson, |Ayes:|Fuentes, Conway, Ammiano, |
| |Conway, Hernandez, Ma, | |Bradford, Charles |
| |Niello, Smyth | |Calderon, Coto, Davis, De |
| | | |Leon, Hall, Harkey, |
| | | |Miller, Nielsen, Norby, |
| | | |Skinner, Solorio, |
| | | |Torlakson, Torrico |
|-----+--------------------------+-----+--------------------------|
|Nays:|Hill, Nava | | |
| | | | |
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SUMMARY : Extends the sunset date, from January 1, 2011 to
January 1, 2014, on existing law requiring a roofing contractor
to obtain and maintain workers' compensation insurance, even if
he or she has no employees, and extends the parallel sunset date
requiring the Department of Insurance (CDI) to report on this
effect.
EXISTING LAW :
1)Requires private employers to secure the payment of
compensation by obtaining and maintaining workers'
compensation insurance or to self-insure as an individual
employer or as one employer in a group of employers. The
Contractors' State License Law requires every licensed
contractor to have on file at all times with the Contractors'
State License Board (CLSB) a current and valid Certificate of
Workers' Compensation Insurance or Certification of
Self-Insurance, or a statement certifying that he or she has
no employees and is not required to obtain or maintain
workers' compensation insurance coverage.
2)Requires a contractor, until January 1, 2011, with a C-39
roofing classification to obtain and maintain workers'
compensation insurance even if he or she has no employees.
Failure to comply with this requirement results in the
AB 2305
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automatic suspension of the license.
FISCAL EFFECT : According to the Assembly Appropriations
Committee analysis, annual fee-supported special fund costs of
less than $30,000 to CLSB to continue oversight of roofers'
workers' compensation coverage.
COMMENTS : A C-39 roofing contractor is certified to install
products and repair surfaces that seal, waterproof and
weatherproof structures.
AB 881 (Emmerson) Chapter 38, Statutes of 2006 requires all
licensed roofers to have workers compensation insurance,
authorizes the registrar of contractors to remove the roofing
classification from a contractor license for failure to maintain
workers' compensation insurance, and requires insurers who issue
workers compensation policies to roofing contractors to perform
annual audits of these policyholders, as specified, and allows
the insurers to recoup the cost of these audits through a policy
surcharge. The bill also required CDI to designate a rating
organization to compile data on individuals with C-39
designations and report to CDI each year on total annual payroll
and loss data in accordance with the standard workers'
compensation insurance classifications.
AB 881 was necessary because, according to the author, "The
roofing industry in California pays among the highest workers'
compensation rates of all industries in the state. The nature
of the work requires considerable investment in order to ensure
the protection and safety of industry workers and contractors.
However, a high incidence of payroll reporting fraud has also
helped lead to these exorbitant costs, as many roofing
contractors under-report their payroll in order to secure lower
workers' [compensation] premiums." The incidence of payroll
reporting fraud was so high, according to supporters, that 3,000
out of the 5,900 licensed C-39 roofers in California claimed to
not have any employees. The sponsor, the Roofing Contractors
Association of California (RCAC), and supporters state that the
annual audits make it more difficult for a roofer to
under-report his or her payroll and commit insurance fraud.
This bill extends these requirements until 2016.
Initial CDI reports analyzing the effect of AB 881 indicate that
roofing contractors are obtaining workers' compensation policies
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at a rate generally consistent to their numbers, so contrary to
some concerns, these individuals are not moving their business
underground.
RCAC writes, "AB 881 has made inroads, but the work of
eradicating the underground economy is far from over. We have
held meetings with the [CDI] and State Compensation Insurance
Fund, and they acknowledge the degree of the problem, and are
cooperating with RCAC in our efforts to expose fraudulent
operators. It is critical for the provisions of AB 881 to
continue, via AB 2305, so that the efforts to fight the
underground economy and its effects are not undermined."
The California Applicants' Attorneys Association writes, "AB
2305 would create a perverse incentive for unethical roofing
contractors to commit workers' compensation fraud, and unfairly
shift costs not only to law-abiding roofing contractors, but to
all legitimate employers."
Analysis Prepared by : Sarah Weaver / B., P. & C.P. / (916)
319-3301
FN: 0004196