BILL ANALYSIS
AB 2305
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Date of Hearing: April 20, 2010
ASSEMBLY COMMITTEE ON BUSINESS, PROFESSIONS AND CONSUMER
PROTECTION
Mary Hayashi, Chair
AB 2305 (Knight) - As Amended: April 14, 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, and extends the parallel sunset date
requiring the Department of Insurance (DOI) to report on this
effect.
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."
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Background . A C-39 roofing contractor is certified to install
products and repair surfaces that seal, waterproof and
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. The bill also required DOI to designate a rating
organization to compile data on individuals with C-39
designations and report to DOI each year on total annual payroll
and loss data in accordance with the standard workers'
compensation insurance classifications.
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 (RCAC), 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.
Initial DOI reports analyzing the effect of AB 881 indicate that
roofing contractors are obtaining workers' compensation policies
at a rate generally consistent to their numbers, so contrary to
some concerns, these individuals are not moving their business
underground.
Arguments in support . 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 DOI and State Compensation
Insurance Fund, and they acknowledge the degree of the problem,
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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, "AB 2305 would create a perverse incentive
for unethical roofing contractors to commit workers'
compensation fraud, and unfairly shift costs not only to
law-abiding roofing contractors, but to all legitimate
employers."
Author's amendments:
The author has agreed to reduce the sunset date on all
provisions in the bill from 2016 to 2014.
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
REGISTERED SUPPORT / OPPOSITION :
Support
The Roofing Contractors Association of California (sponsor)
California Department of Insurance
California Professional Association of Specialty Contractors
Construction Industry Legislative Council
Imperial Roofing
State Building and Construction Trades Council of California
Union Roofing Contractors Association
United Union of Roofers, Waterproofers and Allied Workers
Opposition
California Applicants' Attorneys Association
Analysis Prepared by : Sarah Weaver / B., P. & C.P. / (916)
AB 2305
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