BILL ANALYSIS
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|SENATE RULES COMMITTEE | AB 2305|
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THIRD READING
Bill No: AB 2305
Author: Knight (R)
Amended: 7/01/10 in Senate
Vote: 21
SENATE BUS., PROF. & ECON. DEV. COMMITTEE : 5-1, 6/21/10
AYES: Negrete McLeod, Aanestad, Calderon, Correa, Yee
NOES: Florez
NO VOTE RECORDED: Wyland, Oropeza, Walters
SENATE LABOR & INDUS. RELATIONS COMMITTEE : 5-0, 6/23/10
AYES: DeSaulnier, Ducheny, Hollingsworth, Leno, Yee
NO VOTE RECORDED: Wyland
SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8
ASSEMBLY FLOOR : 62-11, 5/13/10 - See last page for vote
SUBJECT : Contractors: workers compensation insurance
coverage
SOURCE : Roofing Contractors Association of California
DIGEST : This bill extends the sunset date, from January
1, 2011 to January 1, 2013, on 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 to report on this effect.
CONTINUED
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ANALYSIS :
Existing law :
1. Licenses and regulates more than 300,000 contractors,
including C-39 roofing classification contractors, under
the Contractors State License Law by the Contractors
State License Board (CSLB) within the Department of
Consumer Affairs (DCA). The CSLB is under the direction
of the registrar of contractors (Registrar).
2. 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.
3. Requires every licensed contractor to have on file at
all times with the CSLB a current and valid Certificate
of Workers' Compensation Insurance or Certification of
Self-Insurance; allows all specialty and general
contractors to claim exemption from the requirement to
have workers compensation insurance if the contractor
certifies it does not have any employees or is otherwise
exempt from having workers' compensation insurance.
4. Provides that failure of a licensed contractor to obtain
or maintain workers' compensation insurance coverage, if
required under the Contractors State License Law, shall
result in the automatic suspension of the license by
operation of law. The suspension shall be effective on
the earlier of the date that the workers' compensation
insurance coverage lapses or the date that workers'
compensation coverage is required to be obtained.
5. Requires a contractor, until January 1, 2011, with a
C-39 roofing classification to obtain and maintain
workers compensation insurance whether or not it has
employees. Requires the CSLB to remove the C-39
classification if a contractor holds a C-39
classification in addition to another license
classification and does not have a valid Certificate of
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Workers' Compensation Insurance or Certification of
Self-Insurance on file with CSLB. The law would require
the suspension of the license when the sole
classification is the C-39 roofing classification.
6. Until January 1, 2011, requires a workers' compensation
insurer who provides a policy to a contractor with a
C-39 classification to perform an annual payroll audit
for the contractor, and allows the insurer to place a
surcharge on the policy holder to recoup reasonable
costs of the audit.
7. Until January 1, 2011, requires the Insurance
Commissioner, through the Workers' Compensation
Insurance Rating Bureau (WCIRB), to annually compile
statistical data on those holding C-39 licenses.
This bill:
1. Extends the sunset date, from January 1, 2011 to January
1, 2013, on the law requiring a contractor with a C-39
roofing classification to obtain and maintain workers
compensation insurance, even if it has no employees.
2. Extends the parallel sunset date requiring insurance
companies to perform an annual payroll audit of C-39
contractors, and the Department of Insurance to annually
compile information on C-39 contractors.
3. Requires the suspension of any license that, after
January 1, 2011, is active and has had the C-39 roofing
classification removed, if the licensee is found by the
registrar of contractors to have employees and to lack a
valid Certificate of Workers' Compensation Insurance or
Certification of Self-Insurance.
4. Requires the report given annually to the Insurance
Commissioner regarding statistical data on those holding
C-39 licenses, as reported by the appropriate state
entity, be given to the Legislature, as specified.
Background
A C-39 roofing contractor is certified to install products
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and repair surfaces that seal, waterproof and weatherproof
structures. The CSLB has more than 5,000 active C-39
licensees currently on file.
Prior Legislation
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 requires 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.
SB 313 (DeSaulnier), Chapter 640, Statutes of 2009,
increases the per-employee penalty for the lack of workers
compensation coverage from $1000 to $1500. Requires the
Director of the Department of Industrial Relations to issue
a penalty assessment order, as specified. Restructures the
laws governing penalties to be assessed on employers that
do not comply with the law mandating that every employer
provide, through insurance or an approved self-insurance
program, workers' compensation benefits for its employees.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
SUPPORT : (Verified 8/4/10 )
Roofing Contractors Association of California (source)
California Labor Federation
Construction Industry Legislative Council
State Building and Construction Trades Council of
California
Union Roofing Contractors Association
United Union of Roofers, Waterproofers and Allied Workers
Numerous Roofing Companies
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OPPOSITION : (Verified 8/4/10)
California Applicants Attorneys Association
ARGUMENTS IN SUPPORT : This bill is sponsored by the
Roofing Contractors Association of California (RCAC) in
order to extend the provisions enacted by AB 881
(Emmerson), Chapter 38, Statutes of 2006. The RCAC
believes that extending the sunset on this program will
keep in place a comprehensive approach to eliminating fraud
in the roofing industry, which increases system efficiency
while also bringing down costs for California's roofing
contractors.
The RCAC states, "The roofing industry in California has
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
premiums. When roofing companies under report their
payroll and carry substandard levels of workers
compensation insurance, their employees are put at an even
higher risk without appropriate insurance coverage in
place."
The Union Roofing Contractors Association states that "AB
881 has had some success in eradicating the rampant fraud
that is inherent in our industry. The Department of
Insurance and the State Compensation Insurance Fund has
been working closely with the roofing industry in this
endeavor, but more work needs to be done. The extension of
AB 881 provisions via your bill would go a long way in
extirpating an "underground economy" of fraudulent
contractors whose activities have created an unlevel
playing field to the detriment of honest licensed
contractors. AB 2305 would require all workers'
compensation insurers to audit all policies against a
company's payroll records to ensure that under-reporting is
not taking place. By auditing every California roofing
contractor's payroll and workers' compensation policy, it
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becomes increasingly difficult to commit acts of payroll
and insurance fraud."
ARGUMENTS IN OPPOSITION : The California Applicants
Attorneys Association (CAAA) writes, "AB 2305 would create
a perverse incentive for unethical roofing contractors to
commit workers' compensation premium fraud, and unfairly
shift costs from the roofing industry not only to
legitimate employers, but also to taxpayer-funded programs
and services." CAAA states that these current provisions
which this bill would extend were enacted in 2006 for a
five-year trial period in lieu of provisions that require
automatic suspension of the license until coverage is
secured."
ASSEMBLY FLOOR :
AYES: Adams, Anderson, Arambula, Bass, Beall, Bill
Berryhill, Tom Berryhill, Blakeslee, Blumenfield,
Bradford, Buchanan, Caballero, Charles Calderon, Carter,
Chesbro, Conway, Cook, Coto, Davis, De La Torre, De Leon,
DeVore, Emmerson, Fletcher, Fuentes, Fuller, Furutani,
Gaines, Galgiani, Garrick, Gilmore, Hall, Harkey,
Hayashi, Hernandez, Huber, Huffman, Jeffries, Jones,
Knight, Logue, Bonnie Lowenthal, Ma, Mendoza, Miller,
Nestande, Niello, Nielsen, V. Manuel Perez, Portantino,
Ruskin, Silva, Smyth, Solorio, Audra Strickland,
Torlakson, Torres, Torrico, Tran, Villines, Yamada, John
A. Perez
NOES: Ammiano, Evans, Feuer, Fong, Hill, Lieu, Monning,
Nava, Salas, Saldana, Swanson
NO VOTE RECORDED: Block, Brownley, Eng, Hagman, Norby,
Skinner, Vacancy
JJA:do 8/4/10 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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