BILL ANALYSIS
SB 1254
Page 1
Date of Hearing: June 15, 2010
ASSEMBLY COMMITTEE ON BUSINESS, PROFESSIONS AND CONSUMER
PROTECTION
Mary Hayashi, Chair
SB 1254 (Leno) - As Amended: April 8, 2010
SENATE VOTE : 34-0
SUBJECT : Contractors: workers' compensation insurance
coverage.
SUMMARY : Authorizes the Contractors State License Board (CSLB)
to issue a stop work order when a contractor fails to provide
adequate workers' compensation coverage for employees.
Specifically, this bill :
1)Authorizes CSLB to issue a stop work order, effective
immediately, prohibiting licensed and unlicensed contractors
from using employee labor if they fail to provide adequate
workers' compensation insurance coverage for employees.
2)Requires contractors to compensate employees affected by a
work stoppage for lost time, up to 10 days.
3)Makes it a misdemeanor for any employer, officer, or
supervising person to fail to observe a stop order issued and
served, and failure to do so is punishable by imprisonment in
the county jail up to 60 days or a fine up to $10,000, or
both.
4)Allows an employer to protest a stop order by filing a written
request with the CSLB registrar for a hearing within 20 days
after a stop order has been served, and requires the hearing
to be held within five days of the request. The registrar
must notify the employer of the hearing date and time by mail.
5)Requires the CSLB registrar to immediately affirm or dismiss
the stop work order at the conclusion of a hearing, and to
issue and serve all parties to the hearing by registered or
certified mail a written notice of findings within 24 hours of
the conclusion of the hearing.
6)Increases the number of peace officers the Department of
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Consumer Affairs (DCA) may designate to the CSLB special
investigations unit from three to 12.
7)Allows appeal of the ruling to the superior court within 45
days after the mailing of the notice of findings.
EXISTING LAW :
1)Requires employers to carry workers' compensation insurance
and post notices on workers' compensation coverage at the work
site.
2)Imposes civil penalties against employers for failure to carry
workers' compensation insurance, including fines,
imprisonment, and stop work notices.
3)Requires the automatic suspension of a contractor's license by
operation of law if the licensee fails to obtain or maintain
workers' compensation insurance.
4)Authorizes CSLB to take disciplinary action against a
contractor who fails to provide workers' compensation
insurance.
5)Limits the number of peace officers the DCA may designate to
the CSLB special investigations unit to three.
6)Provides that persons designated by DCA as investigators of
the CSLB special investigations unit have the authority of
peace officers in investigating contractor law violations or
any criminal prosecution arising from an investigation
conducted under these laws.
7)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 work order prohibiting the use of employee
labor until the employer complies with the worker's
compensation insurance requirements:
a) The stop order shall become effective immediately upon
service; and,
b) Any employee so affected by work stoppage under the stop
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order shall be paid by the employer for the time lost, up
to 10 days, pending compliance by the employer.
8)Establishes specified procedures to request a hearing to
protest a stop order, as follows:
a) An employer may protest the stop order by filing with
the Director of DIR a written request for a hearing within
20 days after service of the stop order;
b) The hearing must be held within five days from the date
the request is filed;
c) The Director of DIR 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 Director of DIR shall issue and serve by
registered or certified mail the written findings of the
hearing; and,
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.
FISCAL EFFECT : Unknown
COMMENTS :
Purpose of this bill . According to the author's office, "Under
this bill, the registrar of CSLB will have the authority to
issue administrative stop work orders to both licensed and
unlicensed contractors that fail to provide workers'
compensation insurance?. In addition to this new authority, SB
1254 will allow CSLB to request nine additional peace officer
positions through the normal budget process to ensure
enforcement and compliance with this new provision of law."
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,
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permanent disability benefits, supplemental job displacement
benefits, vocational rehabilitation, and death benefits.
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 form.
Current law requires contractors to have workers' compensation
insurance when a project breaks ground (after a project has been
awarded). This bill would authorize CSLB to issue a stop work
order and impose civil penalties against a contractors who fails
to provide adequate workers' compensation coverage. Existing
law makes it a misdemeanor for a contractor to fail to provide
workers' compensation insurance. This bill would enhance
penalties against contractors who fail to provide adequate
workers' compensation insurance by adding a cause of action
(stop work order), that if ignored, renders the contractor
subject to criminal prosecution. CSLB believes that this
penalty enhancement will deter unscrupulous activity.
While existing law provides that CSLB can take disciplinary
action against licensed contractors for failure to provide
workers' compensation insurance coverage for employees, any
disciplinary action against a licensee would have to follow the
rules of the Administrative Procedures Act and would take
months. In addition, the language in this bill authorizes CSLB
to take action against unlicensed contractors on workers'
compensation coverage laws, which CSLB currently does not have
authority over.
Support . According to CSLB, "Contractors, whether licensed or
not, who do not cover their employees with workers' compensation
insurance have an economic and illegal advantage over licensees
who operate their businesses legitimately. Furthermore,
uninsured workers are a potential risk to the public by the fact
that a property owner could have been help liable for their
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injuries. SB 1254 will help to mitigate the harm of law abiding
contractors and consumers alike by providing the CSLB with the
authority to issue an administrative stop work order to any
contractor who employs uninsured workers. A vital feature of
the bill is the misdemeanor provisions that would be applicable
for the violation of a stop work order. Also, the bill's
increase in the authorization for the number of CSLB peace
officers from three to 12 is an essential component, the
enactment of which could more readily assist with our
enforcement efforts against the burgeoning underground economy."
Related Legislation . AB 2390 (Buchanan) of 2010 requires
contractors to include the license number and proof of current
valid workers' compensation insurance of their subcontractors in
a public works bid. This bill is currently pending in the
Senate Rules Committee.
REGISTERED SUPPORT / OPPOSITION :
Support
American Fence Association, California Chapter (sponsor)
California Fence Contractors' Association (sponsor)
Contractors State License Board (sponsor)
Engineering Contractors' Association (sponsor)
Flasher/Barricade Association (sponsor)
Marin Builders' Association (sponsor)
American Subcontractors Association California, Inc.
CalChamber
California Applicants' Attorneys Association
California Association of Sheet Metal and Air Conditioning
Contractors' National Association
California Coalition on Workers' Compensation
California Labor Federation
California Landscape Contractors Association
California Legislative Conference of the Plumbing, Heating and
Piping Industry
California Professional Association of Specialty Contractors
California Spa & 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
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State Building and Construction Trades Council of California
Western Electrical Contractors Association
Opposition
None on file.
Analysis Prepared by : Joanna Gin / B.,P. & C.P. / (916)
319-3301