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Author Topic: Effective 1/1/2017 California Has Enacted AB 2883 Officer Exemption  (Read 15750 times)
 
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beancounter
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« on: August 31, 2016, 06:08:30 PM »

According to the analyses of the bill:

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06/20/16- Senate Labor And Industrial Relations
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Under current law, nearly all employees must be covered through either a workers’ compensation insurance policy or a recognized self-insurance certificate.  However, there are some limited exceptions to this rule.  One example is officers and members of a board of directors of a private corporation or managing partners or general partners of a LLC.  In those cases, the individual workers can elect to not be covered by the employer’s workers’ compensation policy. 

However, the existing election process to opt out of coverage is not very clear.  Beyond one limited statutory reference and very little regulatory guidance, insurers and LLCs are left to figure it out for themselves.  You must login to view links.
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The Association of California Insurance Companies (ACIC)
, one of the supporters of this bill, argues that this lack of clarity has led to abuses that have hurt injured workers and driven fraudulent activity. 

AB 2883 seeks to address this challenge by specifying, in the case of an officer or member of the board of directors, that he or she must own at least 15% of the stock of the corporation in order to opt out of workers’ compensation coverage, as well as sign a waiver stating that the individual is a qualifying officer or member.  Similarly, AB 2883 also requires a general partner of a partnership or a managing member of a LLC to execute a waiver to opt out of workers’ compensation coverage.

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08/12/16- Assembly Floor Analysis
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The law allows officers and owners to opt out of workers' compensation coverage.  The premise is that as key personnel of the company, these people who meet the definition of employee are not necessarily in the class of employee who need the protection of the coverage mandate.  If it makes more sense for these employees to opt out, then they should have that discretion.  However, current law has resulted in abuses.  For example, after a policy period where no losses have occurred, some companies have claimed that numerous employees were not supposed to be covered, and thereby retroactively reduced the premium owed.  More perniciously, some employers were describing janitors as "vice president of sanitation services" or similar designations, thereby denying legitimate employees of workers' compensation protection.  This bill cures these issues.

Therefore, from 1/1/2017 forward, there can never be more than six people excluded.  To get around this, some might establish additional combinable entities to expand the number of employees to exclude.
« Last Edit: September 08, 2016, 12:24:35 PM by beancounter » Logged

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ycooper111
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« Reply #1 on: October 28, 2016, 11:26:07 AM »

Thank you so much for this clarification! but I do have a quick question and please forgive me if this is a dumb question but if the bill was approved and filed on 08/26/16 why is the effective 01/01/17? 

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Bill Text - AB-2883 Workers’ compensation_ employees_.pdf
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Santa Rosa Ins Broker
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« Reply #2 on: November 02, 2016, 10:11:50 AM »

YCooper111,

Most laws take effect the first of the year following the approval process.  Most carriers are starting to notify their insureds of this change. It sounds like most if not all of the carriers will be requiring an Exclusion Letter to be completed and kept on file.

State Fund has been using an Exclusion Letter for years.

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