BILL ANALYSIS
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|SENATE RULES COMMITTEE | SB 1254|
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THIRD READING
Bill No: SB 1254
Author: Leno (D)
Amended: 4/8/10
Vote: 21
SENATE BUSINESS, PROF. & ECON. DEV. COMMITTEE : 7-0, 4/5/10
AYES: Negrete McLeod, Aanestad, Calderon, Correa, Oropeza,
Walters, Yee
NO VOTE RECORDED: Wyland, Florez
SENATE APPROPRIATIONS COMMITTEE : 9-0, 4/26/10
AYES: Kehoe, Cox, Alquist, Corbett, Denham, Leno, Price,
Wolk, Yee
NO VOTE RECORDED: Walters, Wyland
SUBJECT : Contractors: workers compensation
SOURCE : California Fence Contractors Association
Contractors State License Board
Engineering Contractors Association
Flasher/Barricade Association
Marin Builders Association
DIGEST : This bill authorizes the registrar of the
Contractors State License Board (CSLB) to issue a stop
order to any unlicensed or licensed contractor who as an
employer who has failed to secure workers' compensation
insurance coverage for his/her employees, establishes
procedures to request a hearing to protest a stop order,
and authorizes the Director of the Department of Consumer
CONTINUED
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Affairs to designate 12 persons as peace officers for
assignment to the special investigations unit of CSLB.
ANALYSIS :
Existing law, the Business and Professions Code:
1. Licenses and regulates more than 250,000 contractors
under the Contractors State License Law by CSLB within
the Department of Consumer Affairs (DCA). CSLB is under
the direction of the registrar of contractors
(Registrar).
2. Requires every licensed contractor to have on file at
all times with CSLB a current and valid Certificate of
Workers' Compensation Insurance or Certification of
Self-Insurance, or a statement certifying that he/she
has no employees and is not required to obtain or
maintain workers' compensation insurance coverage.
3. Provides that failure of a licensed contractor to obtain
or maintain workers' compensation insurance coverage, if
required under this chapter, shall result in the
automatic suspension of the license by operation of law.
The suspension shall be effective on the earlier of the
date that the workers' compensation insurance coverage
lapses or the date that workers' compensation coverage
is required to be obtained.
Existing law, the Labor Code:
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.
2. Provides that when an employer has failed to secure the
payment of compensation as required, the Director of the
Department of Industrial Relations (DIR) shall issue the
employer a stop order prohibiting the use of employee
labor until the employer complies with the workers'
compensation insurance requirements.
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3. Establishes specified procedures to request a hearing to
protest a stop order.
Existing law, the Penal Code:
1. Designates specified persons employed by
specifically-identified state agencies as peace officers
and gives those persons the power of arrest.
2. Authorizes the Director of DCA to designate three
persons as peace officers to be assigned to the special
investigations unit of CSLB, and prohibits those persons
from carrying firearms.
This bill:
1. Authorizes the Registrar to issue a stop order to any
unlicensed or licensed contractor who as an employer
has failed to secure workers' compensation insurance
coverage for his/her employees.
2. Specifies the stop order is effective immediately upon
service, and that any affected employee shall be paid by
the employer for up to 10 days for his/her time lost,
pending compliance by the employer.
3. Makes failure to comply with the stop order a
misdemeanor (crime) punishable by imprisonment in the
county jail for up to 60 days, or by a fine up to
$10,000, or both.
4. Establishes specified procedures to request a hearing to
protest a stop order, that mirror "Existing law, the
Labor Code:" Item #3). These procedures include the
following:
A. An unlicensed contractor employer may protest the
stop order by filing with the Registrar a written
request for a hearing within 20 days after service of
the stop order.
B. The hearing must be held within 5 days from the
date the request is filed.
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C. The Registrar must notify the employer of the time
and place of the hearing by mail.
D. At the conclusion of the hearing the stop order
shall be immediately affirmed or dismissed, and
within 24 hours thereafter the Registrar shall issue
and serve by registered or certified mail the written
findings of the hearing.
E. A writ of mandate may be taken from the findings
to the appropriate superior court within 45 days
after the mailing of the findings.
4. Authorizes the Director of DCA to designate 12 persons
as peace officers for assignment to the special
investigations unit of CSLB.
Background
The Labor Code 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. These provisions apply to contractors, and the
Business and Professions Code requires a contractor to have
workers compensation insurance or to certify to CSLB that
they do not have any employees as a condition for
licensure.
There is widespread belief in the business community that
high costs are making it increasingly difficult to do
business in California. Often cited as a primary example
of this is the state's workers' compensation system. In
2004, the Legislature undertook reform of policies and
procedures in that system, hoping to curb the skyrocketing
costs of workers' compensation premiums in the state and
made some fundamental reforms.
However, the deteriorating economy has made it difficult
for those engaged in business to make ends meet. In some
cases, legitimate contractors have gone out of business and
have had to lay off their employee workforce. In some
cases, those former employees who do not hold contractor
licenses seek to work in the building or home improvement
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industry, and ultimately become unlicensed contractors. It
naturally would follow that those contracting without a
license would be unlikely to obtain workers compensation
insurance for the workers that they may employ. This cuts
the cost margins for the unlicensed contractor, and often
allows the unlicensed contractor to undercut legitimate,
licensed contractors on price.
Failing to secure unemployment insurance jeopardizes not
only the employees of the unlicensed contractor, but also
the consumer (often a homeowner). If a worker is injured
on the job and there is no workers compensation insurance,
the homeowner may be held liable for medical costs. Often,
homeowners insurance does not cover uninsured workers in
such cases.
Related Legislation
AB 370 (Eng), Chapter 319, Statutes of 2009, increases the
maximum criminal fines for unlicensed contractors, requires
a mandatory jail sentence for a third or subsequent
conviction for unlicensed contracting, and clarifies that
the enhanced penalties for persons with prior unlicensed
activity convictions applies not only for performing work,
but also for offering to perform or submitting a bid to
perform contracting work.
AB 2412 (Eng), 2007-08 Session, was the same as AB 370, but
was one of an unprecedented number of bills that were
vetoed by the Governor citing the delay in passing the
Budget.
AB 881 (Emmerson), Chapter 38, Statutes of 2006, requires
all licensed roofers to have workers compensation
insurance, and authorizes the Registrar to remove the
roofing classification from a contractor license for
failure to maintain workers' compensation insurance.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: Yes
According to the Senate Appropriations Committee:
Fiscal Impact (in thousands)
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Major Provisions 2009-10 2010-11 2011-12 Fund
Stop order hearings $27 $53 $53
Special*
New peace officer positions Minor initial
costs; up to $35 annually Special*
* Contractors State License Fund
SUPPORT : (Verified 4/27/10)
California Fence Contractors Association (co-source)
Contractors State License Board (co-source)
Engineering Contractors Association (co-source)
Flasher/Barricade Association (co-source)
Marin Builders Association (co-source)
American Subcontractors Association-California
California Applicants Attorneys Association
California Association of Sheet Metal and Air Conditioning
Contractors National Association
California Chamber of Commerce
California Coalition on Workers' Compensation
California Labor Federation
California Landscape Contractors Association
California Legislative Conference of the Plumbing, Heating
and Piping Industry
California Spa and Pool Industry Education Council
California State Council of Laborers
California Teamsters Public Affairs Council
Construction Industry Legislative Council
Golden State Builders Exchanges
National Electrical Contractors Association, California
Chapter
Plumbing-Heating-Cooling Contractors of California
State Building and Construction Trades Council
Western Electrical Contractors Association
ARGUMENTS IN SUPPORT : The bill's sponsors argue that
unlicensed contractors have an illegal, unfair advantage
over legitimate licensees, and the use of uninsured
employees represent a potential risk to the public by the
fact that a property owner could be held liable for injures
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to an uninsured worker. The sponsors state that this bill
will provide CSLB with the authority to issue an
administrative stop work order to unlicensed contractors
who are not providing workers' compensation for their
employees, and make failure to comply with the order a
misdemeanor.
The sponsors also state that although the bill increases
the number of peace officers that CSLB may employee from
three to 12, the bill does not automatically increase the
number of CSLB's peace officers. There are still the
current multi-layer approval requirements. CSLB would
still have to seek authorization to employ the additional
peace officers through a Budget Change Proposal (BCP). The
BCP to employ additional peace officers would have to be
approved by both DCA and the Department of Finance, and
ultimately the funds must be appropriated by the
Legislature through the annual Budget process. The
sponsors stress that while CSLB has funding available for
these positions, none will be funded without ultimate
approval in the Budget. The bill provides mere
authorization to move forward in the budget process with
these new positions.
JJA:mw 4/28/10 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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