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
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           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
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          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
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          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