Workers Compensation Laws Changed

Contractors License Workers Compensation Laws ChangedWorkers Compensation laws changed earlier this year, thanks to AB 2883.

And here’s how it’s affecting California contractors and applicants.

This new law, as stated in-part below, requires that corporations carry workers comp if they have officers that own less than 15% ownership in the company.

How does this affect contractors and license applicants?

If you’re a current corporate contractors license holder and you have officers who are listed on the contractors license but not on the corporate record with the Secretary of State (SOS), you should be carrying workers comp for those officers who are not listed on the SOS record.  Or you would need to add those officers to the SOS record*.

If you’re applying for a corporate contractors license for the first time (or changing from a sole owner to a corporation) and are using someone other than yourself as your RMO qualifier, that person must also be listed on your corporate record with the SOS.

Sound simple enough?  Maybe not.  What if the positions of President, Secretary, Treasurer, and Director (PSTD) have all been filled by other personnel besides the RMO qualifier?  Then what?  The SOS only wants to see the names of those individuals, PSTD.  You can always add another Director to the list.  But what if you don’t want your RMO to be on the Board of Directors?  Then what?  Exactly! Then what?!?!  Phone a friend?  Buy a vowel?  Take your ball and go home?

I reached out to the Contractors State License Board to get their input.  Their reply was “The Contractor’s State License Law provides that a licensee must file a certificate of workers’ compensation if they employ anyone who would be subject to the workers’ compensation laws of a California, or they may file a Certificate of Exemption from those laws if they don’t.”  But I know they are not requiring applicants to prove that officers listed on the application have at least 15% ownership.  So the CSLB doesn’t care about workers compensation laws??  It’s very black and white with them… if the license has an RME.. it needs works comp.  That’s it.  Nothing about the other officers listed on the application and how much of the company they own.

Here’s a scenario…

A corporate license application has an RMO qualifier who states he owns 30% of the company and his title is VP.  Additional officers include the President, a Secretary, and a Treasurer.   When the CSLB processes the app, they’re only looking to see if the named President on the app matches the named President on the SOS record.  So, let’s say they match.  The CSLB is then not asking for proof of ownership levels of the other two officers!  Now let’s say that those other two officers, who may or may not be listed on the corporation with the SOS, each own only 10% of the company.  What then?  Well, according to AB 2883, they are in violation of the law for not carrying workers comp!

To go a step further…

Let’s say this corporation attempts to buy a workers compensation policy.  The Pres/CEO will have to sign a waiver form for his officers stating that they each own at least 15% of the company… including the RMO.  But wait, he already owns 30%!  Yes, but if you look at the CSLB website, it only states that the RMO owns “at least 10%”!  State Fund, the workers comp underwriter, doesn’t know that the RMO owns 30% because the CSLB says he only owns at least 10%.  Government working together at its best!

*What if those other officers (Sect./Tres) only own 5% each, and the Pres/CEO and/or Board of Directors is not willing to increase their ownership to 15% EACH?!  Then State Fund will rate their salaries based on the type of construction services the license provides…. increasing your workers comp rates exponentially!

Bottom line…. your workers comp rates will not be through the roof… they’ll be through the stratosphere!

This is nothing but a money-making scheme produced by over paid legislators.  It’s just one more thing to drive businesses out of California!!

AB 2883 States, in part:
Existing law defines an employee, for purposes of the laws governing workers’ compensation, to include, among other persons, officers and members of boards of directors of quasi-public or private corporations while rendering actual service for the corporations for pay. Existing law excludes from that definition, among other persons, officers and directors of a private corporation who are the sole shareholders of the corporation and working members of a partnership or limited liability company, as specified, unless they elect to come under the compensation provisions of the laws governing workers’ compensation.
This bill would revise those exceptions from the definition of an employee to apply to an officer or member of the board of directors, as specified, if he or she owns at least 15% of the issued and outstanding stock of the corporation, or an individual who is a general partner of a partnership or a managing member of a limited liability company, and that person elects to be excluded by executing a written waiver of his or her rights under the laws governing workers’ compensation, stating under penalty of perjury that he or she is a qualifying officer or director, or a qualifying general partner or managing member, as applicable. The bill would specify the effective date of the waivers.

 

 

 

 

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CSLB Gives Fair Warning about Workers Compensation

CSLB Workers CompensationIn the Spring Newsletter, the CSLB gives fair warning about workers compensation.

Begin article…

CSLB Gives Fair Warning to Licensees Misusing Workers’ Comp Exemption

CSLB is contacting licensees who may be improperly claiming that they are exempt from purchasing workers’ compensation (WC) insurance because they have no employees. Contractors who are evading their responsibility to purchase WC coverage be forewarned – there are more moves coming to force compliance with the law.

For now, the educational letters are the first steps in a WC compliance strategy approved by the Board last December. The letter was drafted by CSLB in partnership with the state Employment Development Department (EDD) and Department of Industrial Relations (DIR) after a sampling of agency records and consumer complaints showed a high number of contractors are suspected of doing work that typically requires employees, yet are claiming the WC exemption.

Specifically, three sets of records shed light on what has been a persistent problem with WC fraud:

  • First, CSLB obtained a list of 25,000 contractors who had registered with DIR to perform public works projects. From a sampling of 200 of those licensees, 35 had a WC exemption on file – despite working on jobs that typically require employees.
  • Investigators examined building permits valued at $20,000 or more that were taken out in Los Angeles, Orange, and San Diego counties during a period last March. Of the 91 licensees who pulled permits on these large-scale projects, 34 had claimed the WC exemption.
  • Finally, CSLB looked at consumer complaints received in February, and identified that more than one-third involved WC-exempt contractors who may have been using employees.

Overall, more than 50 percent of all licensees have filed WC exemptions with CSLB, a rate suspected to be too high considering the nature of the contracting work done.

Contractors who falsely claim WC exemptions are taking a great risk to save a little money. WC violators not only face CSLB disciplinary action, but they expose themselves and their clients to liability if uninsured workers get hurt on the job.

Business and Professions Code section 7125 requires contractors to purchase a WC policy and submit proof to CSLB when an active license is issued, an inactive one reactivated, or at the time of renewal, unless the licensee does not employ anyone requited to have a WC policy or files a certification of self-insurance with CSLB. (All C-39 Roofing contractors, however, must carry WC insurance even if they work on their own.)

The letter reminds contractors with questionable WC exemptions about the need to follow the law if they have employees, and informs them about the stepped-up efforts to identify violators.

At its April 2016 meeting, the Board approved the following additional measures as part of an overall WC enforcement strategy:

  • Partner with investigators from district attorney offices and the state Division of Labor Standards to inspect active construction sites through a popular website used by contractors to find job leads and file permits.
  • Work with counties that receive DIR funding to battle WC fraud, and submit the names of serious violators to prosecutors that could result in the filing of criminal charges, rather than administrative action.
  • Expand CSLB’s stings and construction site sweeps to public works projects, partnering with EDD and DIR.

…end article

Don’t get caught without workers compensation. The fines can be very expensive. Having workers compensation now will save you $$ in the long run.

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CSLB Scrutinizing Workers Comp Exemptions

CSLB Scrutinizing Workers Comp ExemptionsThe Contractors State License Board (CSLB) is turning their attention to contractors who they believe should be carrying workers compensation.

In the newsletter article below, the CSLB discusses their plan to look into whether or not a licensee who submitted a workers comp exempt form should actually be carrying a workers comp policy.

Right off the top, any licensee who has employees must and should have workers comp. It’s the law. It benefits the contractor and his employee’s and their families. If you know me, you know that I’m always on the side of the law. If, or course, it just and not abusive.

Regarding the CSLB plan… if it walks like a duck, talks like a duck, it’s a governmental agency abusing its power and authority…. Yet again!

What they’re saying is that if you hold the A-Gen Eng., C8 Concrete, C10 Electrical, C20 HVAC, C36 Plumbing, or the C46 Solar classification, you could be part of their “random” checks. I wonder why they didn’t include the B-Gen??

As with everything else the CSLB does randomly, what exactly is their process for choosing their random sample? Throw darts at a board, pull license numbers out of a hat?

The law states: “Pursuant to Section 7065, the registrar shall conduct a comprehensive investigation of no less than 3 percent of applications filed under this section to ensure that the applicants met the experience requirements of this section.” This is the go to section for a lot of what the CSLB licensing department does. They throw this thing out like it was a coup-fourre card in a Mille Borne game.CSLB Coup Forre

They must look at an app and decide there is something about it and…..BAM!! 7065 COUP FORRE! Unless of course your application is one of the critical classifications, then the minimum 3% rule turns into a mandatory 100% rule!

 

Anyway… back to the random workers comp sampling of the classifications listed above. I personally know plumbers, electricians, HVAC guys, and some B-Gen Bldg. guys who work alone. The fact that the cslb has selected those classifications to focus their attention shows they really have no clue what actually takes place outside of their doors.

A one man shop is going to get a call, letter, or visit from a CSLB enforcement rep and he’s going to have to stop everything he’s doing to prove that he doesn’t have employees. Just what every small business wants to deal with… the heavy hand of State Government. No thank you!

Begin article

Workers’ Comp Exemptions Will Get Extra Scrutiny From CSLB

CSLB will be taking a much closer look at licensees who file exemptions from having to purchase workers’ compensation (WC) insurance, particularly those working in trades likely to need a partner or employees.

At its December meeting, the Board agreed to a strategy to bring more contractors into compliance with California law on WC insurance. More than 50 percent of all licensees have filed WC exemptions with CSLB, a rate suspected to be too high considering the nature of the contracting work done.

Business and Professions Code section 7125 requires contractors to purchase a WC policy and submit proof to CSLB when an active license is issued, an inactive one reactivated, or at the time of renewal, unless the licensee does not employ anyone subject to California WC or files a certificate of self-insurance with CSLB. (All C-39 Roofing contractors, however, must carry WC insurance even if they work on their own.)

To identify contractors who may be improperly claiming a WC exemption, and encourage them to purchase WC policies for employees, CSLB’s Enforcement division will:

  • Perform an analysis and reach out to contractors registered with the state Department of Industrial Relations who bid on public works projects. CSLB staff will perform random checks of those contractors, and send letters to those claiming WC exemptions about the need to provide insurance if they employ workers.
  • Review a sampling of the overall consumer complaints that CSLB receives for contractor WC compliance.
  • Conduct random checks of licensees in classifications most likely to need employee labor, but who hold WC exemptions. Staff will look at those with C-46 SolarC-36 PlumbingC-20 Warm-Air Heating, Ventilation and Air-Conditioning, C-10 ElectricalC-8 Concrete, and “A” General Engineering licensees who have declared they have no employees.
  • Review permit activity in partnering counties to determine if contractors pulling permits for large projects have WC insurance.
  • Coordinate with other state agencies to further identify WC violators. Representatives from CSLB, state Department of Insurance, and Division of Labor Standards will discuss ways to raise WC compliance among contractors.

Contractors who falsely claim WC exemptions are taking a great risk to save a little money. WC violators not only face CSLB disciplinary action, but they expose themselves and their clients to liability if uninsured workers get hurt on the job.

End of article

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Contractors State License Board Beefs Up Public Works Unit

Contractors State License Board Beefs Up Public Works Unit

By Garret Murai, December 30, 2013

The California Contractors State License Board (“CSLB”) has announced that it’s beefing up its Public Works Unit to help ensure that contractors bidding and performing work on public works projects are complying with wage and worker’s compensation laws.

The CSLB’s worker-focused expansion follows the California Labor Commissioner’s record-breaking prevailing wage enforcement actions this year.

And if recently enacted legislation is any indication, labor law will continue to be a hot topic this coming year.

[Read more…]

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