CSLB Taking a Closer Look at Workers' Compensation Insurance Issues

In California, all companies, in whatever industry, are required to cover employees with workers' compensation (WC) insurance. This includes construction.

A WC insurance policy provides covered employees with medical and wage replacement benefits in case of workplace injuries that happen in the normal course of business.

Generally, all businesses with employees must purchase a workers' compensation insurance policy from a private insurance company or the State Compensation Insurance Fund. Some large businesses are self-insured and do not purchase insurance policies from an insurance company. Businesses can also choose to use workers from a labor agency, whose WC insurance policy covers those workers.

To maintain an active contractor license in California, licensees are required to have on file with CSLB either a Certificate of Workers' Compensation Insurance or a Certificate of Self-Insurance (issued by the Department of Industrial Relations), or an exemption stating that the business does not have any employees and, therefore, does not need workers' compensation insurance. (All C-39 Roofing contractors must have workers' compensation, whether or not they have employees.)

Unfortunately, there appears to be a significant number of contractors who bypass this requirement, or possibly commit fraud in the process by underreporting or misreporting their workers.

The link below will take you to a chart, broken down by license classification, that shows the percentage of active contractors with a WC exemption on file with CSLB, as of June 1, 2018:

Click here to view Workers' Compensation Exemption Percentage Breakdown

Last November, CSLB created an advisory committee of two Board members to work with staff and stakeholders to develop strategies to address this problem. These strategies include:

• Continue to share licensee workers' compensation data with interested parties.
• Request a meeting with state agency enforcement partners to discuss information-sharing opportunities, including how to utilize the Workers' Compensation Insurance Rating Bureau to identify licensees who did not cooperate in an insurance audit for possible issuance of a CSLB advisory notice.
• Have CSLB issue a letter of admonishment when a licensee is subject to the WC suspension program, which will serve as a flag to insurance carriers that the licensee has been found to employ workers without a WC policy.
• Provide feedback to the State Compensation Insurance Fund (SCIF)as it relates to the auditing process for C-39 (Roofing) licensees who get workers' compensation through SCIF.

There are also several possible legislative proposals under consideration. These include:

• Adding a mandatory workers' compensation requirement for a limited number of other license classifications.
• Precluding licensees from filing a new workers' compensation exemption with CSLB for a period of one year if they are found to have violated Labor Code 3700 (employed workers without a workers' compensation insurance policy).

Other Resources: