BILL ANALYSIS �
AB 2219
Page 1
Date of Hearing: April 18, 2012
ASSEMBLY COMMITTEE ON INSURANCE
Jose Solorio, Chair
AB 2219 (Knight) - As Amended: March 27, 2012
SUBJECT : Contractors: workers' compensation insurance
SUMMARY : Eliminates the sunset date on existing law requiring
roofing contractors who hold a C-39 classification to maintain
workers' compensation insurance, whether or not they have
employees, and makes additional changes to law regarding C-39
contractors. Specifically, this bill :
1)Requires the Contractors State License Board's (CSLB)
Registrar of Contractors (Registrar) to remove the C-39
classification from any contractor's license that, on January
1, 2013, is active and includes a C-39 classification in
addition to any other classification, unless a valid
certification of workers' compensation insurance or
certification of self-insurance is received by the Registrar.
2)Requires automatic suspension of a license for any CSLB
licensee whose license, after January 1, 2013, is active and
has had the C-39 classification removed and who is found to
have employees and to lack required workers' compensation
coverage.
3)Requires the annual payroll audits for C-39 roofing
contractors, which are conducted by their workers'
compensation insurers, to include an in-person visit to the
place of business of the contractor to verify whether the
number of employees reported by the contractor is accurate.
4)Requires statistical data on contractors holding C-39
licenses, which is compiled by the Insurance Commissioner
(commissioner), to include the number of employers, total
payroll, total losses, and the losses per $100 of payroll by
the employers' annual payroll at certain intervals, as
specified.
5)Deletes the sunset date of January 1, 2013, on current
provisions of law amended by 1) through 4), above.
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6)Makes conforming changes and deletes obsolete provisions.
EXISTING LAW :
1)Provides for the licensing and regulation of contractors by
the CSLB within the Department of Consumer Affairs (DCA). The
Registrar is the CSLB's executive officer.
2)Provides for a series of classifications within the broad
category of contractors, and requires a licensed contractor to
be licensed for the classifications appropriate to the work
they perform. Roofing contractors are the C-39
classification.
3)Requires all employers to secure the payment of workers'
compensation benefits by either obtaining and maintaining a
workers' compensation insurance policy, or by obtaining a
certificate of self-insurance from the Department of
Industrial Relations.
4)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. Except for C-39 contractors, licensed
contractors who certify that they have no employees are not
required to provide a certificate of workers' compensation
insurance.
Requires the Registrar to remove the C-39 classification from
any license that, on January 1, 2011, is active and includes a
C-39 classification in addition to any other classification
unless a valid certification of workers' compensation
insurance or certification of self-insurance is received by
the registrar. Requires automatic suspension of a license for
any licensee whose license, after January 1, 2011, is active
and has had the C-39 classification removed and who is found
to have employees and to lack required workers' compensation
coverage. These provisions sunset January 1, 2013.
5)Requires a workers' compensation insurer who issues a policy
to a contractor with a C-39 classification to perform an
annual payroll audit for the contractor, and allows the
insurer to place a surcharge on the policy holder to recoup
reasonable costs of the audit. This provision sunsets January
1, 2013.
AB 2219
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6)Requires the commissioner, through the Workers' Compensation
Insurance Rating Bureau (WCIRB), to annually compile
statistical data on contractors holding C-39 licenses, as
specified. This provision sunsets January 1, 2013.
FISCAL EFFECT : Unknown
COMMENTS :
1)Purpose of this bill . According to the author, "This measure
removes the sunset date?on a program that requires all Roofing
(C-39) contractors, regardless of whether or not they have
employees, maintain current workers compensation. It also
specifies that the mandatory annual review by insurers of C-39
contractors' books will include an in-person visit to the
place of business of the roofing contractor."
"Eliminating the sunset on this program will ensure a
comprehensive approach to eliminating fraud in the roofing
industry, which increases system efficiency, protects property
owners and roofing employees, while also bringing down costs
for California's honest roofing contractors. Furthermore,
annually verifying reported payroll numbers through in-person
visits (as opposed to simply a phone call) by the insurer
during the audit period will further deter fraudulent claims,
and will provide insurers with a more accurate picture of the
size of roofing operations which they are insuring."
2)Background . California law requires all employers to carry
workers' compensation insurance, even if they have only one
employee or a temporary employee. The CSLB licenses and
regulates California's construction industry. Anyone
performing construction work in California that totals $500
dollars or more in labor and materials must be licensed by
CSLB. There are about 300,000 licensed contractors in the
state, in 43 different licensing classifications, including
almost 4800 active C-39 licenses.
Every licensed contractor must report, in writing, the name and
address of the insurer carrying workers' compensation on his
or her employees to the Registrar within 90 days after any
policy of insurance is issued. The contractor must send a
copy of this report to the insurer. Failure to follow this
reporting requirement is a misdemeanor. If a contractor does
AB 2219
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not have employees, he or she can fill out an exemption from
workers' compensation.
Because of the relatively widespread history of fraud and abuse
by some in the roofing industry, special rules have been put
into place to ensure better compliance, and to ensure a level
playing field for honest roofing contractors. This bill would
retain and expand these special rules.
3)WCIRB report . One of the new provisions of the bill involves
the WCIRB. As introduced, the analysis required by the bill
would have been problematic. However, the March 27 amendments
addressed those concerns, and the report required by the bill
appears reasonable.
4)Related legislation . AB 1794 (Williams), also before the
Insurance Committee at its April 18 hearing, would require
contractors to notify their workers' compensation insurer
within 15 days of employing a worker.
5)Previous legislation . AB 2305 (Knight), Statutes of 2010,
Chapter 423, extended the sunset date, from January 1, 2011,
to January 1, 2016, on existing law requiring a roofing
contractor to obtain and maintain workers' compensation
insurance, even if he or she has no employees, and extended
the parallel sunset date requiring the Commissioner to report
on this effect.
SB 1254 (Leno), Statutes of 2010, Chapter 643, authorized the
CSLB to issue a stop work order when a contractor fails to
provide adequate workers compensation coverage for its
employees.
AB 881 (Emmerson), Statutes of 2006, Chapter 38, required all
licensed roofers to have workers' compensation insurance,
authorized the Registrar to remove the roofing classification
from a contractor's license for failure to maintain workers'
compensation insurance, and required insurers who issue
workers compensation policies to roofing contractors to
perform annual audits of these policyholders.
REGISTERED SUPPORT / OPPOSITION :
Support
AB 2219
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Roofing Contractors Association of California (sponsor)
American Subcontractors Association - California
Associated Roofing Contractors
BEST Contracting Services, Inc.
Brian Hobbs Roofing, Inc.
California Building Industry Association
California Labor Federation
California Professional Association of Specialty Contractors
Construction Industry Legislative Council
Eberhard Roofing
Lawson Roofing Company, Inc.
Malott/Peterson Roofing Company
Reinhardt Roofing
Roof Removal, Inc.
Roofing Contractors Association of California (RCRC)
Rosscrete Roofing, Inc.
State Building and Construction Trades Council
Troyer Contracting Co., Inc.
Union Commercial Roofing
Union Roofing Contractors Association (URCA)
United Union of Roofers, Waterproofers and Allied Workers Local
40
Vance and Associates Roofing, Inc.
Opposition
None received
Analysis Prepared by : Mark Rakich / INS. / (916) 319-2086