BILL ANALYSIS
AB 2305
Page 1
Date of Hearing: April 13, 2010
ASSEMBLY COMMITTEE ON BUSINESS, PROFESSIONS AND CONSUMER
PROTECTION
Mary Hayashi, Chair
AB 2305 (Knight) - As Introduced: February 19, 2010
SUBJECT : Contractors: workers' compensation insurance
coverage.
SUMMARY : 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.
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. The
Contractors' State License Law requires 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.
2)Requires a contractor, until January 1, 2011, with a C-39
roofing classification to obtain and maintain workers'
compensation insurance even if he or she has no employees.
Failure to comply with this requirement results in the
automatic suspension of the license.
FISCAL EFFECT : Unknown
COMMENTS :
Purpose of this bill . According to the author's office, "This
bill is simply an extension of provisions put into law by AB
881."
Background . A C-39 roofing contractor is certified to install
products and repair surfaces that seal, waterproof and
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weatherproof structures.
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, as specified, and allows
the insurers to recoup the cost of these audits through a policy
surcharge.
AB 881 was necessary because, according to the author, "the
roofing industry in California pays among the highest workers'
compensation rates of all industries in the state. The nature
of the work requires considerable investment in order to ensure
the protection and safety of industry workers and contractors.
However, a high incidence of payroll reporting fraud has also
helped lead to these exorbitant costs, as many roofing
contractors under-report their payroll in order to secure lower
workers' [compensation] premiums." The incidence of payroll
reporting fraud was so high, according to supporters, that 3,000
out of the 5,900 licensed C-39 roofers in California claimed to
not have any employees. The sponsor, The Roofing Contractors
Association of California, and supporters state that the annual
audits make it more difficult for a roofer to under-report his
or her payroll and commit insurance fraud.
This bill extends these requirements until 2016.
Previous legislation . 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, as specified,
and allows the insurers to recoup the cost of these audits
through a policy surcharge.
Arguments in support . The Roofing Contractors Association of
California (RCAC) writes, "AB 881 has made inroads, but the work
of eradicating the underground economy is far from over. We
have held meetings with the Department of Insurance and State
Compensation Insurance Fund, and they acknowledge the degree of
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the problem, and are cooperating with RCAC in our efforts to
expose fraudulent operators. It is critical for the provisions
of AB 881 to continue, via AB 2305, so that the efforts to fight
the underground economy and its effects are not undermined."
Arguments in opposition . The California Applicants' Attorneys
Association writes, "Critical provisions in the original
legislation were safeguards that require carriers to perform
annual audits of their roofer policyholders, and the Workers'
Compensation Insurance Rating Bureau to compile and report the
pertinent data from those audits to the Insurance Commissioner
for any necessary action on his part. These requirements also
sunset in 2111, but this bill does not extend them.
"The first report was due in 2008; however, if any such audits
have been performed, no reports have been filed with the
Insurance Commissioner. AS a result, there is no evidence of
any reduction in injuries or premium fraud, which were the
intent and goal of the original legislation."
Proposed committee amendments:
The committee recommends the following conforming amendments to
Insurance Code:
11665 (b): The commissioner shall direct the rating organization
designated as his or her statistical agent to compile pertinent
statistical data on those holding C-39 licenses, as reported by
the appropriate state entity, on an annual basis and provide a
report to him or her each year. The data shall track the total
annual payroll and loss data reported on those holding C-39
licenses in accordance with the standard workers' compensation
insurance classifications applicable to roofing operations. The
first report shall be filed no later than March 1, 2008, and
shall cover the data compiled for the 2005 calendar year.(c)
This section shall become operative on January 1, 2007, and
shall remain in effect only until January 1, 2011 2016 , and as
of that date is repealed, unless a later enacted statute, that
is enacted before January 1, 2011 2016 , deletes or extends that
date.
REGISTERED SUPPORT / OPPOSITION :
Support
AB 2305
Page 4
Construction Industry Legislative Council
The Roofing Contractors Association of California
Opposition
California Applicants' Attorneys Association
Analysis Prepared by : Sarah Weaver / B., P. & C.P. / (916)
319-3301