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CSLB Industry Bulletin - 12/31/2012

CSLB Authorized to Discipline Contractors Who Fail to Report New Employees

Contractors Must Report New Employees to EDD within 20 Days

SACRAMENTO — Contractors should be aware that employee reporting laws have been strengthened by the passage of Assembly Bill 1794. In addition to the current 20-day reporting requirement, the new law, effective January 1, 2013, authorizes the Employment Development Department (EDD) to share new-hire employee information with agencies in the state’s Joint Enforcement Strike Force on the Underground Economy (JESF) (of which the Contractors State License Board (CSLB) is a member) and the State Compensation Insurance Fund (SCIF). Efficient information-sharing among state offices will ensure that employers are accurately reporting their employee payroll to their insurance carrier for establishing their workers’ compensation insurance premium.

With the newly shared information among the three agencies, CSLB can take disciplinary action against contractors who fail to accurately report new employee information within 20 days of the established hire date. AB 1794 (which amends Unemployment Insurance Code section 1088.5) specifically enables EDD, SCIF, and CSLB to establish a memorandum of understanding to audit, investigate, and prosecute those who violate tax withholding requirements and commit premium insurance fraud.

Contractors currently are required to carry adequate workers’ compensation insurance for employees or submit to CSLB either an exemption or Certificate of Self Insurance. C-39 Roofing contractors are required to carry workers’ compensation insurance even if they do not have employees. However, a CSLB study revealed that approximately half of licensed contractors either claim an exemption based on having no employees or maintain a minimum policy under which no employees are reported to their insurance carrier.

When a contractor underreports employees to obtain a lower workers’ compensation premium, law-abiding contractors who report their employees correctly are placed at a competitive business disadvantage by having to pay up to five times more in workers’ compensation insurance premiums.

“This landmark legislation benefits consumers, contractors, and employees,” said CSLB Registrar Steve Sands. “When employers properly report and insure employees, consumers are protected by workers’ compensation insurance coverage if an accident occurs on their property, businesses pay less in insurance premiums, and employees are eligible for unemployment insurance when they’re property listed on the payroll.”

CSLB encourages all contractors to refresh their knowledge of new employee reporting requirements, and to use EDD’s online information to assure that their employees are accurately reported.