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CSLB Stresses Importance of Carrying Appropriate Workers' Compensation Insurance for Employees

SACRAMENTO -The Contractors State License Board (CSLB) is urging its 315,000 licensees to make sure all employees are covered by the appropriate amount of workers' compensation insurance. By law, employers are required to carry insurance that covers employees who are injured on the job or become ill due to the job. That's the case even if they have as few as one employee or if the employees are temporary. All Roofing (C-39) licensees are required to carry workers' compensation insurance, even if they don't have any employees. In addition, the Employment Development Department considers most home improvement salespersons to be employees. Carrying less than the required amount is considered to be insurance premium fraud.

CSLB licensees must submit proof of their workers' compensation insurance coverage to CSLB (Certificate of Workers' Compensation Insurance from insurer or Certificate of Self-Insurance from the Department of Industrial Relations). This proof must be received by CSLB within 90 days of hiring someone. If the licensee does not have any employees, they are required to submit to CSLB an Exemption from Workers' Compensation form, under penalty of perjury.

"We understand why businesses try to cut expenses, but cheating on workers' compensation insurance is illegal," said CSLB Registrar Steve Sands. "Employees are left unprotected if they get hurt, and contractors who break the law have an unfair business advantage over those who follow the rules. Fraud also drives up the price of insurance for all of us."

In the coming months, CSLB and other state government agencies will concentrate some of their enforcement efforts-including sting and sweep operations-on companies that either don't carry workers' compensation insurance, or misrepresent the number of employees they have in order to get lower insurance rates.

Penalties for not carrying workers' compensation insurance can be severe. The penalty for a first offense of Labor Code Section 3700.5 is up to one year in county jail and a $10,000 fine. A stop order can also be issued on work projects, with fines of $1,000 per employee on the payroll at that time, up to $100,000. There are additional penalties if an injured worker files a workers' compensation claim and the employer doesn't have the proper insurance. That employee can also file a civil action against the employer.

The penalties for workers' compensation insurance premium fraud are even stiffer. In addition to felony charges, failure to maintain the appropriate workers' compensation insurance can result in a company's CSLB license being suspended. In addition, any work performed with a suspended license is considered to be unlicensed and CSLB can take disciplinary action against the license.

Getting Workers' Compensation Insurance

There are a number of ways to purchase workers' compensation insurance in California. Policies can be purchased through an agent or a broker from any of the privately licensed insurers that are authorized to write policies in California. A list of authorized insurers is available on the California Department of Insurance Web site (www.insurance.ca.gov). If a company can't find an insurer willing to cover them, the State Compensation Insurance Fund (www.scif.com) is required to provide coverage. Some trade groups negotiate special rates for members. A local chamber of commerce may also be a source of good advice.

Companies can also choose to be self insured. Historically, only large companies could do this because of legal requirements; however, in recent years group self insurance, in which several small employers pool their workers' compensation liabilities, has become available. Learn more from the California Department of Industrial Relations (www.dir.ca.gov/SIP/sip.html).

 

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