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New Worker’s Compensation Law Can Adversely Affect California Businesses

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Things are becoming increasingly complicated and costly for California business owners as far as worker’s compensation goes according to an announcement made by California Department of Insurance (CDI) Commissioner Dave Jones.

The definitions of and procedures related to excluded employees have changed due to Assembly Bill 2883 which will go into effect on January 1, 2017. Due to the change, worker’s compensation will now require the coverage of certain officers and directors of private corporations and others previously excluded from coverage. The law was supported by both the American Insurance Association (AIA) as well as the Association of California Insurance Companies (ACIC).

The California Department of Insurance Commissioner Dave Jones was not so pleased with the new law saying, “AB 2883 is going to cause significant disruption for workers’ compensation insurers and employers.” Being that under the new law insurers are expected to determine and report the premium to policyholders, insurers are equally displeased as this leaves them to be the bearer of bad news.

CDI officials said that prior to this assembly bill being signed into law, officers, directors, and working partners were not generally required to be covered by the business’ workers compensation insurance. “Unfortunately, AB 2883 did not include any language exempting in-force policies or delaying its effective date so as not to impact in-force policies. The DIR (Department of Industrial Relations), AIA and ACIC agree that this change in law applies to in-force policies,” Jones added.
According to the news release, AB 2883 changes this presumption so that officers, directors, and partners are generally required to be covered under the employer’s workers’ compensation policy unless they meet a narrower definition of excluded employee, and even this narrower set of officers, directors, and partners, as defined, can only opt out of coverage by signing a waiver under penalty of perjury and filing the waiver with their employer’s insurer.

Commissioner Jones said that workers compensation insurers were notified as to what the new law requires of them, including notifying the business owners whom they insure of any employees who were previously excluded who may now need to be covered or to sign a waiver. Only those who own 15% or more of the company stock are able to opt out per the new law. 

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