BILL ANALYSIS Ó AB 2883 Page 1 CONCURRENCE IN SENATE AMENDMENTS AB 2883 (Committee on Insurance) As Amended August 2, 2016 Majority vote -------------------------------------------------------------------- |ASSEMBLY: | 80-0 |June 1, 2016 |SENATE: | 37-0 |(August 11, | | | | | | |2016) | | | | | | | | | | | | | | | -------------------------------------------------------------------- Original Committee Reference: INS. SUMMARY: Clarifies the rules that govern when owners or officers of businesses may exclude themselves from workers' compensation coverage, and deletes a duplicative Labor Code Section. The Senate amendments delete a mandate for the Commission on Health and Safety and Workers' Compensation to conduct a study, and add provisions that specify how officers and owners of employers can declare that they are not "employees" of the company for purposes of workers' compensation insurance. EXISTING LAW: 1)Contains two nearly identical Labor Code Sections numbered 6354.7 that establish a Workers' Occupational Safety and AB 2883 Page 2 Health Education Fund, delineates the purposes of the Fund, and provides that the funds may be expended by the CHSWC. 2)Provides that officers and owners of employers may opt out of workers' compensation coverage otherwise mandated for all employees of the company, but does not establish a clear procedure for how the opt out is to be accomplished. FISCAL EFFECT: The bill was referred from the Senate Appropriations Committee pursuant to Senate Rule 28.8. COMMENTS: 1)Repeal of Labor Code Section 6354.7. Legislative Counsel engages annually in a "Code clean-up" review, and recently noted that there are two Sections with the same number that are virtually identical. Both were adopted in 2002 in separate bills by the same author. One bill was apparently aimed at workers' compensation administration, and the other aimed at benefits, but this provision managed to appear in both bills. 2)Officers and owners. The law allows officers and owners to opt out of workers' compensation coverage. The premise is that as key personnel of the company, these people who meet the definition of employee are not necessarily in the class of employee who need the protection of the coverage mandate. If it makes more sense for these employees to opt out, then they should have that discretion. However, current law has resulted in abuses. For example, after a policy period where no losses have occurred, some companies have claimed that numerous employees were not supposed to be covered, and thereby retroactively reduced the premium owed. More perniciously, some employers were describing janitors as "vice-president of sanitation services" or similar designations, thereby denying legitimate employees of workers' compensation protection. This bill cures these issues. AB 2883 Page 3 Analysis Prepared by: Mark Rakich / INS. / (916) 319-2086 FN: 0004134