BILL ANALYSIS �
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|SENATE RULES COMMITTEE | AB 878|
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THIRD READING
Bill No: AB 878
Author: Bill Berryhill (R), et al
Amended: 8/16/11 in Senate
Vote: 21
SENATE BUSINESS, PROF. & ECON. DEV. COMM. : 9-0, 6/20/11
AYES: Price, Emmerson, Corbett, Correa, Hernandez, Negrete
McLeod, Vargas, Walters, Wyland
SENATE LABOR & INDUSTRIAL RELATIONS COMM. : 6-0, 6/29/11
AYES: Lieu, Wyland, DeSaulnier, Leno, Padilla, Yee
NO VOTE RECORDED: Runner
SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8
ASSEMBLY FLOOR : 75-0, 5/26/11 (Consent) - See last page
for vote
SUBJECT : Contractors: workers compensation insurance
SOURCE : Contractors State License Board
DIGEST : This bill requires a workers compensation
insurer to report to the Contractors State License Board
when the insurer cancels the insurance policy of a licensed
contractor after the insurer has conducted an audit of the
contractor, the contractor has made a material
misrepresentation that results in financial harm to the
insurer, and no reimbursement has been paid by the
contractor to the insurer. This bill also provides that
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willful or deliberate disregard and violation of workers'
compensation insurance laws by a contractor constitutes a
cause for disciplinary action by the Registrar of
Contractors against the licensee.
ANALYSIS :
Existing law:
1. Licenses and regulates more than 300,000 contractors
under the Contractors State License Law by the
Contractors State License Board (CSLB) within the
Department of Consumer Affairs. The CSLB is under the
direction of the Registrar of Contractors (Registrar).
2. 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.
3. Requires every licensed contractor to have on file at
all times with the CSLB a current and valid Certificate
of Workers' Compensation Insurance or Certification of
Self-Insurance; allows all specialty and general
contractors to claim exemption from the requirement to
have workers compensation insurance if the contractor
certifies it does not have any employees or is otherwise
exempt from having workers' compensation insurance.
4. Provides that failure of a licensed contractor to obtain
or maintain workers' compensation insurance coverage, if
required under the Contractors State License Law, 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.
5. Requires a workers' compensation insurer, including the
State Compensation Insurance Fund (SCIF), to report to
the CSLB regarding each licensed contractor's policy:
the name, license number, policy number, dates that
coverage is scheduled to commence and lapse, and
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cancellation date if applicable.
6. Establishes a cause for disciplinary action by the CSLB
for a contractor who:
A. Files a false certification of exemption from
the workers' compensation requirement.
B. Employs a person after the filing of an
exemption certificate without first filing a
Certificate of Workers' Compensation Insurance or
Certification of Self-Insurance.
C. Employs a person subject to coverage under the
workers' compensation laws without maintaining
coverage for that person.
This bill:
1. Requires a workers' compensation insurer to report to
the CSLB a licensed contractor whose workers'
compensation insurance policy it cancels when all of the
following conditions are met:
A. The insurer has completed a premium audit or
investigation.
B. The insured contractor makes a material
misrepresentation that results in financial harm to
the insurer.
C. No reimbursement has been paid by the insured
contractor to the insurer.
2. Provides that willful or deliberate disregard and
violation of workers' compensation insurance laws
constitutes a cause for disciplinary action by the
Registrar against the licensee.
3. Specifies that the information in Item #1 above, which
is reported to the CSLB by an insurer, shall be
confidential and shall be exempt from disclosure under
the California Public Records Act.
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4. Makes legislative findings and declarations regarding
the confidentiality of the information specified as
exempt from disclosure under the California Public
Record Act.
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. 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. SCIF is the largest
provider of workers' compensation insurance in California.
Each of the more than 300,000 licensed contractors must
carry workers' compensation insurance and file proof of
coverage with the CSLB. This proof can be in either of two
forms: A Certificate of Workers' Compensation Insurance
issued and filed by an insurer licensed to write workers'
compensation insurance in California; or, a Certification
of Self-Insurance issued and filed by the Director of
Industrial Relations.
Contractors who meet the following conditions are not
required to carry workers' compensation insurance:
The contractor has no employees and files a statement
with the CSLB certifying that he or she has no employees
and is not otherwise required to provide for workers'
compensation insurance coverage.
The contractor does not hold a C-39 roofing
classification license.
Failure to carry workers compensation or to meet the
exemption requirements results in automatic license
suspension and reinstatement can be made at any time by
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showing proof of compliance.
Workers' compensation fraud occurs when the employer
misrepresents the number of employees that need to be
insured, or does not fully provide coverage for employees.
According to the author's office, the CSLB relates that the
Special Investigation Unit staff with SCIF and private
carrier, First Comp Insurance, indicates that the CSLB can
expect to receive referrals for two percent of the 10
percent of insured licensed contractors engaged in
fraudulent activity, approximately 600 annually, if
referrals are restricted to:
Completed audits that are not subject to referral for
criminal prosecution.
Failure to reimburse the insurance company.
Cancellation of the policy.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
SUPPORT : (Verified 8/15/11)
Contractors State License Board (source)
Associated General Contractors
California Chapter of the American Fence Association
California Fence Contractors' Association
California Landscape Contractors Association
California Spa and Pool Industry Education Council
Engineering Contractors' Association
Flasher Barricade Association
Marin Builders Association
ARGUMENTS IN SUPPORT : The author states, "The proposed
legislation is intended to reduce premium insurance fraud
and address construction employers engaged in fraudulent
activity but not at the level that warrants felony
prosecution. The CSLB understands that insurance carriers
routinely perform audits that determine fraudulent
activity. Again, the most egregious offenders are subject
to felony prosecution; however, many other violators are
addressed by cancellation of the insurance policy and are
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not subject to any disciplinary action."
The author indicates that the bill does not create any
additional workload for the insurance carrier; they only
need to forward the CSLB a copy of their completed audit.
Prosecutors will be able to continue to focus on the most
egregious offenders while the lesser offenders are
addressed administratively by the CSLB, according to the
author.
ASSEMBLY FLOOR : 75-0, 5/26/11
AYES: Achadjian, Alejo, Allen, Ammiano, Atkins, Beall,
Bill Berryhill, Block, Blumenfield, Bonilla, Bradford,
Brownley, Buchanan, Butler, Charles Calderon, Carter,
Chesbro, Conway, Cook, Dickinson, Donnelly, Eng, Feuer,
Fletcher, Fong, Fuentes, Furutani, Beth Gaines, Galgiani,
Garrick, Gatto, Gordon, Grove, Hagman, Halderman, Hall,
Harkey, Hayashi, Roger Hern�ndez, Hill, Huber, Hueso,
Huffman, Jeffries, Knight, Lara, Logue, Bonnie Lowenthal,
Ma, Mansoor, Mendoza, Miller, Mitchell, Monning, Morrell,
Nestande, Nielsen, Norby, Olsen, Pan, Perea, V. Manuel
P�rez, Portantino, Silva, Skinner, Smyth, Solorio,
Swanson, Torres, Valadao, Wagner, Wieckowski, Williams,
Yamada, John A. P�rez
NO VOTE RECORDED: Campos, Cedillo, Davis, Gorell, Jones
JJA:do 8/15/11 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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