BILL ANALYSIS �
AB 1794
Page 1
Date of Hearing: April 24, 2012
ASSEMBLY COMMITTEE ON BUSINESS, PROFESSIONS AND CONSUMER
PROTECTION
Mary Hayashi, Chair
AB 1794 (Williams) - As Amended: April 9, 2012
SUBJECT : Contractors: worker's compensation insurance
reporting.
SUMMARY : Requires contractors to notify their workers'
compensation (WC) 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 Contractors State License Board (CSLB) for a
contractor to fail to notify his or her WC insurer within 20
days of hiring a new employee.
2)Specifies that the remedy established for violations of this
provision are in addition to and not limited upon other
remedies otherwise available.
3)Requires an insurer that issues a WC 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 WC 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 for provisions related to contractor
payroll audits to January 1, 2015.
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 WC coverage,
or, unless the contractor is a roofing contractor, file a
declaration certifying that the contractor has no employees.
AB 1794
Page 2
3)Requires roofing contractors to additionally file proof of
maintaining compliance with WC coverage requirements even if
the contractor has no employees.
4)Requires WC insurers that insure roofing contractors to
conduct an annual payroll audit of the contractor and sunsets
this provision on January 1, 2013.
FISCAL EFFECT : Unknown
COMMENTS :
Purpose of this bill . According to the author, "AB 1794 will
require licensed contractors to notify their insurance carrier
of hiring an employee within 20 days. Additionally, AB 1794
provides the authority to discipline a licensee for failing to
notify his or her WC insurance carrier of hiring an employee in
a timely manner. This bill only affects licensed construction
contractors as defined by Business & Professions Code 7026.
"Existing law requires private employers to secure the payment
of compensation by obtaining and maintaining WC insurance or to
self-insure as an individual employer or as one employer in a
group of employers. Contractors' License Law requires every
licensed contractor to have on file at all times with the CSLB a
current and valid Certificate of WC Insurance or Certification
of Self-Insurance, or a statement certifying that he or she has
no employees and is not required to obtain or maintain WC
insurance coverage.
"Unlike automobile or health insurance policies that require
immediate notification to the insurance carrier when adding a
vehicle or seeking to add a family member to insurance policies,
WC carriers only require periodic reporting of payroll and an
annual reconciliation. WC carriers do not currently require
notification by an employer when a worker is hired.
Subsequently, many employers have minimum policies and only add
an injured worker after the injury occurs, thus increasing the
cost for premium paying contractors who legitimately report
employees."
Background . 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
AB 1794
Page 3
had a higher profile of "underground economy" activity in recent
years, the CSLB believes that underreporting is a serious
problem across all license classifications.
Support . The sponsor of this bill, the California State Council
of Laborers, writes in support, "AB 1794 addresses the problem
with regard to unscrupulous contractors who intentionally
underreport and/or fail to report employees as a means to
curtail paying adequate WC premiums. This growing problem of
'premium insurance fraud' has led to WC premium rates
skyrocketing throughout the state, and has forced many
law-abiding construction employers to pay two to three times
more in WC premiums to cover 'high risk' workers.
"AB 1794 will require licensed contractors to notify their
insurance carrier of hiring an employee within 20 days.
Additionally, AB 1794 provides the authority to discipline a
licensee for failing to notify his or her WC insurance carrier
of hiring an employee in a timely manner.
"AB 1794 will create a more competitive bid environment by
requiring all contractors to play by the same rules and incur
the same costs when bidding on a project. By requiring
contractors to report new employees, AB 1794 will also capture a
portion of the billions of dollars lost in underreported annual
payroll taxes - at a time the state needs it most."
REGISTERED SUPPORT / OPPOSITION :
Support
California State Council of Laborers
Opposition
Associated General Contractors
Analysis Prepared by : Angela Mapp / B.,P. & C.P. / (916)
319-3301