BILL ANALYSIS Ó AB 397 Page 1 Date of Hearing: March 22, 2011 ASSEMBLY COMMITTEE ON BUSINESS, PROFESSIONS AND CONSUMER PROTECTION Mary Hayashi, Chair AB 397 (Monning) - As Introduced: February 14, 2011 SUBJECT : Workers' compensation insurance: contractors. SUMMARY : Requires an active contractor licensee with an exemption for workers' compensation insurance to recertify the exemption upon license renewal or provide proof of workers' compensation insurance coverage. Specifically, this bill : 1)Requires, at the time of renewal, all active licensees of the Contractors State License Board (CSLB) with an exemption for workers' compensation insurance on file with the CSLB to recertify the exemption by completing a recertification statement on the license renewal form, as provided by the board, or to provide a current and valid Certificate of Workers' Compensation Insurance or Certificate of Self-Insurance, whichever is applicable. 2)Prohibits license renewal unless the licensee meets the above requirements. 3)Provides for retroactive renewal if the licensee meets the above requirements within 30 days after notification by the CSLB of renewal rejection. 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. 2)Requires, under the Contractors' State License Law, 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. AB 397 Page 2 FISCAL EFFECT : Unknown COMMENTS : Purpose of this bill. According to the author's office, "There are currently no provisions for the active maintenance of workers' compensation exemption certifications. A license could have an exemption certification on file for years without needing to confirm that it is still an accurate representation of the licensee's status. In many cases, when a licensee is questioned about his/her employee status by CSLB, it turns out that the licensee does have employees and has a workers' compensation insurance policy, but has just not filed it with the CSLB." Background. The CSLB within the Department of Consumer Affairs (DCA) licenses and regulates more than 300,000 contractors under the Contractors State License Law. All licensed contractors must carry workers' compensation insurance and file proof of coverage with the CSLB. This proof can be in two forms: A Certificate of Workers' Compensation Insurance issued and filed by an insurer licensed to write workers' compensation insurance in California; or, a Certification of Self-Insurance issued and filed by the Director of Industrial Relations. Contractors who meet the following conditions are not required to carry workers' compensation insurance: 1) The contractor has no employees and files a statement with the CSLB certifying that he or she has no employees and is not otherwise required to provide for workers' compensation insurance coverage; and 2) The contractor does not hold a C-39 roofing classification license. Failure to comply results in automatic license suspension, and reinstatement can be made at any time by showing proof of compliance. The CSLB must retroactively reinstate a license if certification is received within 90 days of the certification's effective date, or if the licensee demonstrates that failure to have a certificate on file was due to circumstances beyond the licensee's control. AB 397 Page 3 While license renewal occurs every two years, the certification of exemption from workers' compensation requirements is filed only once. The CSLB, sponsor of this bill, notes that approximately 60% of their licensees have exemptions on file. The board is concerned with the number of contractors that might have started business with an exemption, but subsequently expanded and added employees without knowing about or obtaining required workers' compensation coverage. This bill does not appear to create any undue burden on contractors, as the recertification statement would be included on the license renewal form that contractors already have to submit to the CSLB. The bill also provides a 30-day "grace" period for contractors to comply after they receive notice from the CSLB that their renewal application has been rejected. Related legislation. AB 2305 (Knight), Chapter 423, Statutes of 2010, extends the sunset date, from January 1, 2011, to January 1, 2016, 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 to report on this effect. SB 313 (DeSaulnier), Chapter 640, Statutes of 2009, restructures the laws governing penalties to be assessed on employers who do not provide workers' compensation benefits, and increases the per-employee penalty for the lack of workers compensation coverage from $1000 to $1500. 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. REGISTERED SUPPORT / OPPOSITION : Support AB 397 Page 4 Contractors State License Board (sponsor) California Chamber of Commerce California Chapter of the American Fence Association California Fence Contractors' Association California Landscape Contractors Association California Professional Association of Specialty Contractors Construction Industry Legislative Council Engineering Contractors' Association Flasher Barricade Association Golden State Builders Exchanges Insurance Brokers and Agents of the West Marin Builders' Association National Association of the Remodeling Industry of Greater Sacramento National Association of the Remodeling Industry of San Diego Northern California Tile Industry Labor Management Cooperation Committee Spa and Pool Industry Education Council Opposition None on file. Analysis Prepared by : Angela Mapp / B.P. & C.P. / (916) 319-3301