BILL ANALYSIS
Senate Committee on Labor and Industrial Relations
Mark DeSaulnier, Chair
Date of Hearing: June 23, 2010 2009-2010 Regular
Session
Consultant: Gideon L. Baum Fiscal:Yes
Urgency: No
Bill No: AB 2305
Author: Knight
Version: As Amended April 22, 2010
SUBJECT
Contractors: workers' compensation insurance coverage.
KEY ISSUE
Should the Legislature extend sunset provision to a pilot
program that requires roofing contractors to maintain workers'
compensation coverage?
PURPOSE
To extend the sunset for a requirement that all roofing
contracts maintain workers' compensation coverage, as well as
extend unique enforcement provisions for roofing contractors.
ANALYSIS
Existing law:
1) Establishes a workers' compensation system that provides
benefits to an employee injured at work, irrespective of
fault. This system requires all employers to secure
payment of benefits by either securing the consent of the
Department of Industrial Relations to self insure or by
securing insurance against liability from an insurance
company duly authorized by the state;
2) Requires every licensed contractor to have on file at
all times with the Contractors' State License Board 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;
3) Requires that if a licensee fails to obtain or maintain
workers' compensation insurance coverage, this failure must
result in the automatic suspension of the license;
4) Defines a C-39 licensee as a roofing contractor that
installs products and repairs surfaces that seal,
waterproof and weatherproof structures.
5) 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
automatic suspension of the license.
6) Requires the Insurance Commissioner to direct the
Workers Compensation Insurance Ratings Bureau (WCIRB) to
track the total annual payroll and loss data for C-39
licensee holders and report their findings on an annual
basis. This requirement will sunset on January 1, 2011.
This bill would extend the sunset provisions discussed above to
January 1, 2014 .
This bill would also require that for any license that, for any
license that, on January 1, 2011 , is active and includes a C-39
license classification in addition to any other classification,
the registrar shall remove the C-39 license classification
rather than suspend the license, unless a valid Certificate of
Workers' Compensation Insurance or Certification of
Self-Insurance is received by the Contractors State Licensing
Board (CSLB).
COMMENTS
1. Need for this bill?
Hearing Date: June 23, 2010 AB 2305
Consultant: Gideon L. Baum Page 2
Senate Committee on Labor and Industrial Relations
This bill extends the sunset on a pilot program dealing with
roofers and workers' compensation that was first created
through AB 881 (Emmerson) Chapter 38, Statutes of 2006. AB
881 was a response to a high amount of workers' compensation
fraud and payroll fraud in the roofing industry due to high
workers' compensation premiums in the roofing industry. By
auditing workers compensation compliance and payroll numbers,
the sponsor and the author believe that it will be more
difficult for a roofer to engage in fraud. Moreover, by
requiring all roofers to have workers' compensation coverage,
the author and sponsor believe that this makes the fraud
requirements more clear-cut.
AB 2305 also extends the enforcement provisions of AB 881 by
requiring that, for those licensed as of January 1, 2011, the
Contractors State Licensing Board (CSLB) removes the licensing
certification from a licensed roofer that lacks workers'
compensation coverage, rather than suspending the license
totally. This enforcement provision, like the licensing
provision, is unique to the roofing industry.
According to data supplied by the Workers Compensation Rating
Insurance Bureau (WCIRB), in 2005 there were 7,913 licensed
roofers, and 4,527 (57%) lacked workers compensation coverage
or their plan could not be located by the WCIRB. In 2007,
which is the most recent year data is available, there were
7,690 licensed roofers, and 3,344 (43%) lacked workers'
compensation insurance or their plan could not be located by
the WCIRB.
2. Proponent Arguments :
The supporters note that, due to high workers' compensation
premiums for the roofing industry, payroll and workers'
compensation fraud are significant and persistent problems for
the industry. Supporters state that, due to this, property
owners are unknowingly exposed to liability and that there is
an unleveled playing field in the industry, as a small number
of roofers pay a disproportionately high share of workers'
compensation costs, as well as face competition from roofers
Hearing Date: June 23, 2010 AB 2305
Consultant: Gideon L. Baum Page 3
Senate Committee on Labor and Industrial Relations
also not paying taxes. Supporters believe that AB 881
(Emmerson), Chapter 38, Statutes of 2006, made significant
progress in combating the underground economy, and that this
pilot program should be extended in order to continue that
progress.
3. Opponent Arguments :
The California Applicants' Attorneys Association (CAAA)
believes that this bill 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. CAAA
believes that suspending C-39 licenses will simply encourage
the roofer to continue to work, but work unlicensed and in the
underground economy. CAAA argues that AB 2305 would create a
double standard that permits an illegally uninsured roofing
contractor to maintain their license and only lose their
roofing certification, while other contractors are hit with
penalties and stop orders for illegally lacking workers'
compensation coverage.
4. Prior Legislation :
AB 881 (Emmerson) Chapter 38, Statutes of 2006, was discussed
above.
SUPPORT
Alex Engardt Roofing and Siding Co.
Associated Roofing Contractors of Northern California, Inc.
Construction Industry Legislative Council
Local Union No. 40 - United Union of Roofers, Waterproofers and
Allied Workers, AFL-CIO
Roofing Contractors Association of California
State Building and Construction Trades Council, AFL-CIO
Union Roofing Contractors Association
Hearing Date: June 23, 2010 AB 2305
Consultant: Gideon L. Baum Page 4
Senate Committee on Labor and Industrial Relations
OPPOSITION
California Applicants' Attorneys Association
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Hearing Date: June 23, 2010 AB 2305
Consultant: Gideon L. Baum Page 5
Senate Committee on Labor and Industrial Relations