Contractors State License Board Proposes Amendments to SB 216 after Years of Ineffectively Enforcing Workers’ Compensation Insurance Requirement

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By Thomas A.T. Ferrari

At its January 26, 2022 meeting, the Contractors State License Board’s (CSLB) Legislative Committee, heard an update on SB 216 (Dodd), a Board-sponsored bill pertaining to workers’ compensation.  Staff reported that the bill has become a two-year bill and has moved off the inactive file to the Senate floor and has since been voted over to the Assembly.  As written, SB 216 (Dodd) would amend sections 7125 and 7125.4 of the Business and Professions Code to require concrete contractors holding a C-8 license, HVAC contractors holding a C-20 license, or tree service contractors holding a D-49 license to obtain and maintain workers’ compensation insurance, even if that contractor has no employees.  According to the staff memo (p. 99), 50 to 60% of contractors who currently claim the sole-member exemption do in fact hire employees, creating an unfair competitive disadvantage for law-abiding contractors who are subject to higher business costs, and placing employees and the public at risk for workplace injuries. This bill aims to eliminate that problem.

At the January 26, 2022 Legislative Committee meeting (Agenda Item E), staff reported on three proposed amendments to SB 216 that the author is currently considering. The first is to have the insurance requirement take effect three years after SB 216 passes instead of in 2025, and only for license classifications that are not explicitly mentioned in the bill. The second proposed amendment would include asbestos abatement contractors holding a C-22 license to the list of contractors specifically required to have workers’ compensation insurance on file, whether or not they hire employees. The third amendment would maintain an exemption for joint venture entities, so as not to require the joint venture to obtain an additional insurance policy when each of the individual members has insurance policies through their pre-existing entities. Of note, staff reported that the third proposed amendment followed public comment which raised concerns that unnecessary insurance requirements would arise as the bill was written. CSLB clarified that contractors who created joint venture entities for the purpose of securing larger project contracts will not be required to insure the joint venture, so long as each of the contractors underlying the joint venture are individually insured. The projected fiscal impacts also require an update, as the licensing fees have increased in 2022.

In its staff memo, CSLB reported a conservative projection with an estimated five percent decline in licensee population when licensees who currently do not have a policy are required to obtain one. This would result in CSLB losing revenue of $115,000 annually for three years and then roughly $1,400,000 on an ongoing basis thereafter.

At this writing, the bill has not been amended to reflect CSLB’s requests and is pending referral at the Assembly desk.

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