BILL ANALYSIS
AB 2390
Page 1
Date of Hearing: May 4, 2010
ASSEMBLY COMMITTEE ON BUSINESS, PROFESSIONS AND CONSUMER
PROTECTION
Mary Hayashi, Chair
AB 2390 (Buchanan) - As Amended: April 28, 2010
SUBJECT : Public works projects: bidding practices: licenses
and worker's compensation insurance.
SUMMARY : Requires contractors to include the license number
and proof of current valid workers' compensation insurance of
their subcontractors in a public works bid. Specifically, this
bill :
1)Requires contractors to include the license number and proof
of current valid workers' compensation insurance of
subcontractors who will perform work for the prime contractor
in a public works bid.
2)Requires contractors to possess current, valid workers'
compensation insurance when bidding on public works projects.
3)Expands the information contractors must provide on all
subcontractors, to include the license number and proof of
workers' compensation insurance.
EXISTING LAW :
1)Establishes the Division of Workers' Compensation under the
Department of Industrial Relations (DIR) to monitor the
administration of workers' compensation claims and provide
administrative and judicial services to resolve claim
disputes.
2)Provides for the licensing and regulation of insurance brokers
and agents by the Department of Insurance (DOI).
3)Provides for the licensing and regulation of contractors by
the Contractors State License Board (CSLB).
4)Requires employers to carry workers' compensation insurance
and post notices on workers' compensation coverage at the work
site.
AB 2390
Page 2
5)Imposes civil penalties against employers for failure to carry
workers' compensation insurance, including fines,
imprisonment, and stop work notices.
6)Requires contractors to include their license numbers in all
construction contracts, subcontracts, bids, and
advertisements.
7)Requires the automatic suspension of a contractors license by
operation of law if the licensee fails to obtain or maintain
workers' compensation insurance.
8)Authorizes CSLB to take disciplinary action against a
contractor who fails to provide workers' compensation
insurance.
9)Requires contractors to provide the name and business location
of subcontractors who will perform work or labor or render
service to the prime contractor, or a licensed subcontractor
who specially fabricates or installs a portion of the work
according to plan specifications in an amount in excess of
0.5% of the prime contractor's total bid, or in the case of
streets, highways, or bridges, in excess of 0.5% of the prime
contractor's total bid or $10,000, whichever is greater.
FISCAL EFFECT : Unknown
COMMENTS :
Purpose of this bill . According to the author's office,
"Currently, there are no requirements for a contractor to
possess valid workers' compensation insurance at the time the
contractor makes a bid or offer for a public works contract.
This bill seeks to require the contractor to possess workers'
compensation insurance at the time of the bid to ensure the
contractor provides for workers' compensation insurance."
Background . California law requires all employers to carry
workers' compensation insurance, even if they have only one
employee or a temporary employee. This allows employees to
receive covered medical treatment for on-the-job injuries or
illnesses. Workers' compensation insurance provides six basic
benefits: medical care, temporary disability benefits,
permanent disability benefits, supplemental job displacement
benefits, vocational rehabilitation, and death benefits.
AB 2390
Page 3
Insurance carriers charge employers premiums to provide workers'
compensation insurance that factor in the company's industry
classification, history of work-related injuries, and payroll
history.
Contractors must submit proof of their workers' compensation
insurance coverage in the form of a Certificate of Workers'
Compensation Insurance or Certification of Self-Insurance, along
with their license number and specified information, to CSLB.
CSLB must receive this proof of coverage within 90 days of the
contractor hiring an employee. If a contractor does not have
employees, he or she can fill out an Exemption from Workers'
Compensation.
Current law requires contractors to have workers' compensation
insurance when a project breaks ground (after a project has been
awarded). This bill would require contractors and
subcontractors to have workers' compensation insurance when
bidding on a project. In 2009, CSLB received 38 complaints
against licensees related to workers' compensation violations.
Support . According the California State Council of Laborers,
"Unfortunately, there are too many examples of contractors
working without workers' compensation insurance or not enough
coverage. Regrettably, most of these cases are only discovered
after an accident has occurred or during an enforcement action.
DOI estimates that there is over $11.5 billion in workers'
compensation fraud annually. AB 2390 seeks to give the public
and the contracting entity a chance to find fraud before our
precious public works dollars are spent. It does this by simply
requiring, in addition to the contractor's name and business
location, that the contractor provides the current, valid
license number issued by CSLB, and proof of current, valid
workers' compensation insurance of each contractor who will
perform work. While this measure may not end workers'
compensation fraud, it will provide more security to awarding
agencies by giving them a better view of a contractor's
experiences and giving enforcement agencies more information on
who is bidding on public works."
According to the California State Pipe Trades Council, the State
Association of Electrical Workers, and the Western States
Council of Sheet Metal Workers, "AB 2390 would require that
contracting firms and subcontracting firms have a valid license
and workers' compensation insurance when submitting a bid for a
AB 2390
Page 4
public works construction project, rather than at the time the
job commences. Far too often, however, the winning bidder never
obtains the appropriate credentials and insurance prior to
starting the project. Once construction has commenced it
becomes very costly to replace a negligent contractor or re-bid
the job. In most instances, the project owner simply fails to
do the necessary follow-up to ensure compliance. By simply
requiring that these qualifications are produced prior to bid,
will provide a very effective remedy to these unfortunate
situations."
Related Legislation . SB 1254 (Leno) of 2010 authorizes CSLB to
issue a stop order to any licensed or unlicensed contractor who
has failed to secure workers' compensation insurance coverage
for his or her employees.
REGISTERED SUPPORT / OPPOSITION :
Support
California State Council of Laborers (sponsor)
California State Pipe Trades Council
State Association of Electrical Workers
State Building and Construction Trades Council of California
Western States Council of Sheet Metal Workers
Opposition
None on file.
Analysis Prepared by : Joanna Gin / B.,P. & C.P. / (916)
319-3301