BILL ANALYSIS �
AB 1794
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Date of Hearing: April 18, 2012
ASSEMBLY COMMITTEE ON INSURANCE
Jose Solorio, Chair
AB 1794 (Williams) - As Amended: April 9, 2012
SUBJECT : Contractors: workers' compensation
SUMMARY : Requires contractors to notify their workers'
compensation insurer within 20 days of hiring a new employee.
Specifically, this bill :
1)Provides that it is a misdemeanor and cause for disciplinary
action by the Contractor's State License Board (CSLB) for a
contractor to fail to notify its workers' compensation insurer
within 20 days of hiring a new employee.
2)Specifies that the remedy established for violations of this
provision shall be in addition to any other remedies otherwise
available.
3)Requires an insurer that issues a workers' compensation policy
to a contractor to require the contractor/policyholder to
notify it of the hiring of a new employee within 20 days.
4)Requires a workers' compensation insurer that insures any
contractor to annually conduct a payroll audit of the
contractor, and authorizes the imposition of a surcharge on
the policyholder to pay for the audit.
5)Extends the sunset date, to January 1, 2015, of the expanded
contractor payroll audit provision.
EXISTING LAW :
1)Provides for the licensing and regulation of contractors by
the CSLB.
2)Requires each contractor to file with the CSLB proof of
compliance with the requirement of maintaining workers'
compensation coverage, or, unless the contractor is a roofing
contractor, file a declaration certifying that the contractor
has no employees.
3)Requires roofing contractors to additionally file proof of
AB 1794
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maintaining compliance with workers' compensation coverage
requirements even if the contractor has no employees.
4)Requires workers' compensation insurers that insure roofing
contractors to conduct an annual payroll audit of the
contractor, but sunsets this provision on January 1, 2013.
FISCAL EFFECT : Undetermined.
COMMENTS :
1)Purpose . According to the author, the bill is intended to
curb abuses by unscrupulous contractors who intentionally
under-report or fail altogether to report payroll, thereby
defrauding workers' compensation insurers, placing injured
workers at risk, and gaining an unfair competitive advantage
over honest contractors.
2)Underground economy . This bill expands upon rules that
already apply to roofing contractors by applying them to all
contractors (audit provisions), and additionally adopts the
20-day reporting requirement for all contractors. While
roofing contractors have had a higher profile of "underground
economy" activity in recent years (see AB 2219, also being
heard at the April 18, 2012 hearing of the Insurance
Committee), the CSLB believes that underreporting is a serious
problem across all license classifications.
3)Support . Supporters, labor organizations and the CSLB all
support the bill because of the history of underreporting in
this industry, and the potential that the enhanced enforcement
tools will provide a level playing field for honest
contractors, who suffer from unfair competition from
contractors who are cheating on their workers' compensation
premiums.
REGISTERED SUPPORT / OPPOSITION :
Support
California Labor Federation
California State Council of Laborers
Contractors State License Board
Opposition
AB 1794
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None received.
Analysis Prepared by : Mark Rakich / INS. / (916) 319-2086