BILL ANALYSIS Ó
AB 2219
Page 1
Date of Hearing: May 9, 2012
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Felipe Fuentes, Chair
AB 2219 (Knight) - As Amended: March 27, 2012
Policy Committee: InsuranceVote:13
- 0
Business and Professions 9 - 0
Urgency: No State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill eliminates the January 1, 2013, sunset date on a pilot
project that required roofing contractors who hold a C-39
classification to maintain workers' compensation insurance,
whether or not they have employees, and requires their workers'
comp insurers to conduct annual payroll audits on these
particular licensees. Specifically, this bill:
1)Requires that for any license that, on January 1, 2013, 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).
2)Requires the annual payroll audits for C-39 roofing
contractors, which are conducted by their workers'
compensation insurers, to include an in-person visit to the
place of business of the contractor to verify whether the
number of employees reported by the contractor is accurate.
3)Requires statistical data on contractors holding C-39
licenses, which is compiled by the California Department of
Insurance (CDI), to include the number of employers, total
payroll, total losses, and the losses per $100 of payroll by
the employers' annual payroll at certain intervals.
4)Deletes the January 1, 2013 sunset on current provisions of
law as it pertains to roofing contractors' workers'
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compensation insurance requirements.
FISCAL EFFECT
1)A significant portion of the 4,800 active licensed roofing
contractors are insured by the State Compensation Insurance
Fund (SCIF). Requiring SCIF auditors to conduct annual
in-person audits on all of these contractors would likely cost
in excess of $500,000 per year. The bill provides the
insurers, including SCIF, with the authority to charge fees to
recoup their costs.
2)Minor and absorbable costs for the Contractors State License
Board (CSLB), Department of Industrial Relations and CDI.
COMMENTS
1)Purpose . This bill removes the sunset on a pilot program
dealing with roofers and workers' compensation that was
created by AB 881 (Emmerson) Chapter 38, Statutes of 2006. AB
881 was a response to a high amount of workers' compensation
fraud by roofing contractors who were under reporting the
number of people in their employ due to high workers'
compensation premiums. The author and the sponsors believe
the pilot project has been successful and should become
permanent.
The results of the pilot project over the last five years have
been promising. The data shows a significant increase in the
percentage of C-39 contractors who are carrying workers'
compensation coverage. It is unclear, however, as to whether
those contractors always had coverage and are simply now being
counted due to the improvement in the data sharing between
CSLB and the Workers Compensation Rating Insurance Bureau
(WCIRB), or whether those contractors started providing
coverage for their employees as a result of the annual audits
and the new requirements.
According to data supplied by WCIRB, in 2005 there were 7,913
active and inactive licensed roofing contractors, and 4,527
(57%) lacked workers compensation coverage or their plan could
not be located by the WCIRB. In 2009, which is the most
recent year data is available, there were 7,094 active and
inactive licensed roofers, and 1,241 (17%) lacked workers'
compensation insurance or their plan could not be located by
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the WCIRB.
2)C-39 Roofing Contractors . A C-39 roofing contractor is
certified to install products and repair surfaces that seal,
waterproof and weatherproof structures. The CSLB has
approximately 6,140 active and inactive (4,800 active) C-39
licensees currently on file.
3)State Compensation Insurance Fund (SCIF) . California employers
must provide workers' compensation benefits to their employees
under state labor law. Employers must purchase workers'
compensation insurance from either a licensed insurance
company, or through SCIF, or employers may choose to
self-insure, which means they use a pay-as-you go model,
paying benefits to and on behalf of workers as the costs are
incurred. SCIF, created by the Legislature in 1914, is the
insurer of last resort in California's private insurance
market and is now the largest workers' compensation insurer in
the country.
While SCIF was created by the Legislature, it is not part of
state government. It is a quasi-state agency with a board of
directors appointed by the governor and the Legislature (11
total members, nine appointed by the governor and two
appointed by the Legislature). SCIF is a non-profit,
independent organization funded by premiums paid by businesses
purchasing workers compensation insurance policies.
4)Background . The CSLB licenses and regulates California's
construction industry. Anyone performing construction work in
California that totals $500 dollars or more in labor and
materials must be licensed by CSLB. There are about 300,000
licensed contractors in the state, in 43 different licensing
classifications, including the active C-39 licenses.
Every licensed contractor must report, in writing, the name and
address of the insurer carrying workers' compensation on his
or her employees within 90 days after any policy of insurance
is issued. The contractor must send a copy of this report to
the insurer. If a contractor does not have employees, he or
she can fill out an exemption from workers' compensation.
5)Chaptering Problem . Both AB 2219 (Knight) and AB 1794
(Williams) seek to amend Insurance Code section 11665. Unless
chaptering language is included in these bills, one of them
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will be chaptered out if both bills are eventually signed by
the governor.
6)Related Legislation . Currently, AB 1794 (Williams) makes it a
misdemeanor and a cause for disciplinary action when an
employer fails to notify his or her worker's compensation
insurance carrier within 20 days of hiring a new employee.
That bill is currently pending before this committee.
AB 2305 (Knight), Statutes of 2010, Chapter 423, extended the
sunset date, from January 1, 2011, to January 1, 2013, on
existing law requiring a roofing contractor to obtain and
maintain workers' compensation insurance, even if he or she
has no employees, and extended the parallel sunset date
requiring the Commissioner to report on this effect.
Analysis Prepared by : Julie Salley-Gray / APPR. / (916)
319-2081