Assembly Bill 2883 How Regulations May Affect Your Insurance Coverage and Premiums

Woodruff Sawyer strives to keep clients and partners up to date on the legislative and regulatory changes impact the construction industry. Assembly Bill 2883 was recently enacted into law. This bill modifies existing labor code sections and amends the criteria to exclude officers and members of the board of directors of private companies, limited liability companies, general partnerships, and corporations. Take the necessary steps to ensure your compliance by reading the assessment we've put together.

Assembly Bill 2883

Effective January 1, 2017, AB 2883 amends the criteria to exclude officers and members of the board of directors of private companies, limited liability companies, general partnerships and corporations. The bill modifies Labor Code Sections 3351 and 3352, specifically the definition of employee and the eligibility for exclusion from Workers Compensation.

Now the following can elect to be excluded:

1. A Corporate Office/Director that owns at least 15% of the corporations issued and outstanding stock; or
2. A General Partner of a Partnership or a Managing Member of a Limited Liability Company (the 15% ownership requirement does not apply to General Partners and Managing Members)

Impact of AB 2883

All California workers compensation carriers must comply with this new legislation beginning January 1st, 2017 for all in-force policies (regardless of the inception date of the policy). Those Officers and Directors owning less than 15% of the common stock of the corporation can no longer elect to be excluded from Workers' Compensation coverage and their payroll is eligible for inclusion in premium calculation effective January 1st, 2017 (subject to the Workers Compensation Insurance Rating Bureaus minimum/maximum payroll rules).

Assuring Compliance

Below are recommended next steps to ensure your firm remains in compliance with the new law:

1. Review your firms Corporate Officers/Directors and ownership % to determine which individuals are eligible for exclusion under the new criteria.
2. For those individuals who want to exclude themselves and meet the exclusion criteria, complete and sign the Waiver Form provided by your Workers' Compensation insurance carrier and return to your broker/Insurance Carrier no later than December 31, 2016.
3. For individuals that are no longer eligible for exclusion, we recommend consulting with your broker to determine the appropriate class code and payroll that will apply.