BILL ANALYSIS Ó
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|Hearing Date:June 6, 2011 |Bill No:AB |
| |397 |
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SENATE COMMITTEE ON BUSINESS, PROFESSIONS
AND ECONOMIC DEVELOPMENT
Senator Curren D. Price, Jr., Chair
Bill No: AB 397Author:Monning
As Introduced: February 14, 2011Fiscal:Yes
SUBJECT: Workers Compensation Insurance: contractors.
SUMMARY: Requires a licensed contractor with an exemption for
workers' compensation insurance to recertify the exemption upon
license renewal or provide proof of workers' compensation insurance
coverage.
Existing law:
1) Licenses and regulates more than 300,000 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. (Labor Code commencing with § 3200)
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. (Business and Professions Code
(BPC) § 7125)
4)Provides that failure of a licensed contractor to obtain or maintain
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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. (BPC § 7125.1)
5) Authorizes the Registrar to grant retroactive renewal of a license
if the licensee requests the retroactive renewal in a petition, as
specified. (BPC § 7141.5)
This bill:
1) Requires, at the time of renewal, all active licensees of the 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 provided by CSLB, or to
provide a current and valid Certificate of Workers' Compensation
Insurance or Certificate of Self-Insurance, whichever is
applicable.
2) Prohibits license from being renewed 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.
FISCAL EFFECT: The Assembly Appropriations Committee analysis, dated
April 6, 2011, indicates minor, absorbable one-time cost of $10,000
for programming in 2011-12 to implement this bill.
COMMENTS:
1. Purpose. This bill is sponsored by the Contractors State License
Board (Sponsor) to require every two years at the time of license
renewal, a licensee exempted from workers' compensation to
recertify their status, or to provide a current and valid
certificate of workers' comp insurance or certificate of
self-insurance, whichever applies.
The Sponsor points out that under current law, a contractor is
required only to prove its workers' compensation insurance status
at initial application for the contractor license, and when the
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status of the workers' compensation insurance coverage changes,
there is no mechanism in place to force the licensee to furnish
proof of the coverage to the CSLB.
2. Background. Each of the more than 300,000 licensed contractors
must carry workers' compensation insurance and file proof of
coverage with the CSLB. This proof can be in either of 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:
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
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.
While license renewal occurs every two years, the certification of
exemption from workers' compensation requirements is filed only
once.
The CSLB indicates that approximately 60% of its licensees have
exemptions on file. The CSLB is concerned that a number of
contractors could have started business with an exemption, but
subsequently expanded their business and added employees without
knowing about or obtaining required workers' compensation coverage.
Under the bill, 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 for not completing the
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this new certification requirement.
1. Related Legislation. AB 1091 (Morrell) revises the provisions
which allow a licensed contractor to replace the person on the
license who has the experience and examination requirements
necessary to maintain that license, by requiring the licensee to
notify the CSLB within 90 days of a date of disassociation, if the
person who meets the licensing requirements is no longer associated
with license. That bill is set for hearing by this Committee on
June 6, 2011.
SB 865 (Negrete McLeod) requires the CSLB to provide legal
representation to any person hired to provide expertise in a
licensing or disciplinary matter when, as a result of providing
that expertise, that person is named as a defendant in a civil
action, and requires the CSLB to indemnify the expert for any
judgment rendered against him or her. That bill passed this
Committee 8-0 on April 4, 2011, and is now awaiting hearing in the
Assembly Business, Professions and Consumer Protection Committee.
SB 1254 (Leno, Chapter 643, Statutes of 2010) authorizes the CSLB to
issue a stop work order when a licensed or unlicensed contractor
fails to provide adequate workers compensation coverage for its
employees.
AB 2305 (Knight, Chapter 423, Statutes of 2010), extended a sunset
date, from January 1, 2011, to January 1, 2016, on the law
requiring a C-39 roofing contractor to obtain and maintain workers'
compensation insurance, even if the contractor has no employees,
and extends a parallel sunset date requiring the Department of
Insurance to report on this effect.
SB 313 (DeSaulnier, Chapter 640, Statutes of 2009) restructured 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) required all C-29
licensed roofing contractors to have workers compensation
insurance, authorized the Registrar of contractors to remove the
roofing classification from a contractor license for failure to
maintain workers' compensation insurance, and required insurers who
issue workers compensation policies to roofing contractors to
perform annual audits of these policyholders.
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2. Arguments in Support. According to the Contractors State License
Board who is the Sponsor of the bill, there are currently no
provisions for the active maintenance of workers' compensation
exemption certifications. A contractor's 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. The Sponsor believes that requiring
recertification will help clarify the existing requirement for
worker's compensation insurance and help ensure that licensees are
aware of the requirement at the time of license renewal.
Writing in support of the bill, the California Fence Contractors
Association , the California Chapter of the American Fence
Association , the Engineering Contractors Association , the Flasher
Barricade Association , and the Marin Builders Association believes
that requiring recertification will help ensure that licensees are
aware of the requirement to maintain workers compensation insurance
or a certification of self-insurance at the time of license
renewal.
California Landscape Contractors Associatio n (CLCA) states that about
49% of licensed landscape contractors currently claim an exemption
from the requirement to hold worker's compensation insurance, and
the high proportion of contractors claiming to have no employees
raises concerns relative to non-compliance with the worker's
compensation laws. CLCA believes it makes sense to recertify a
claimed exemption when the contractor license is renewed. To the
extent contractors have unreported employees, it creates an unfair
advantage for those who follow the law and thereby incur higher
labor costs and become less competitive.
California Chamber of Commerce states that employers who violate the
law by failing to provide workers compensation coverage for their
employees should be held accountable for their actions. This small
minority of employers puts their employees at risk and enjoys an
unfair advantage over their law-abiding competitors.
SUPPORT AND OPPOSITION:
Support:
Contractors State License Board (Sponsor)
California Chamber of Commerce
California Chapter of the American Fence Association
California Chapter of the National Electrical Contractors
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Association
California Fence Contractors Association
California Landscape Contractors Association
California Professional Association of Specialty Contractors
Engineering Contractors Association
Flasher Barricade Association
Golden State Builders Exchange
Greater Fresno Area Chamber of Commerce
Marin Builders Association
National Association of the Remodeling Industry
Northern California Tile Industry Labor Management Cooperation
Committee
Western Electrical Contractors Association
Opposition:
None on file as of May 31, 2011
Consultant:G. V. Ayers