California Work Comp Exclusion Rules

July 1, 2018 Legislation Update

Senate Bill 189 impacts policies with effective dates on 7/1/2018 and after

Two bills signed into law in California in 2017 changed the definition of the term "employee" in the California Labor code. This in turn affects who can and can't be excluded for Workers Compensation purposes. (SB 189 revises Assembly Bill 2883).

We hope the information we've gathered helps you understand the new legislation and possible impacts it may have on your premium.

Included below:

 

Summary of the law and helpful references

SB 189 is new legislation which changed Labor Code Section 3351. It also revises some of the changes made in 2017 (AB2883) to the same Labor Code section. This could impact you if you currently exclude or include any Officers, Board Members, LLC Managing Members or General Partners from coverage.

SB 189 changes are applicable to policies with effective dates of 7/1/2018 and after. Summary of requirements:

SB 189 allows exclusion of the owners listed below with Signed Waivers:

  • Corporate Officers and Members of Board of Directors who owns at least 10% of the issued and outstanding stock; and is covered by a health insurance policy or health care service plan.
  • Corporate Officers and Members of Board of Directors who owns at least 1% of the issued and outstanding stock of the corporation if his or her parent, grandparent, sibling, spouse, or child owns at least 10 percent of the issued and outstanding stock; and is covered by a health insurance policy or health care service plan.
  • An owner of a professional corporation, who is a practitioner rendering professional services for which the professional corporation is organized (i.e. Medical Group, Law Firm, etc.); and stating that he or she is covered by a health care service plan or a health insurance policy.
  • An officer or member of the board of directors of a cooperative corporation organized pursuant to the Cooperative Corporation Law; and stating that he or she is covered by a health care service plan or health insurance policy, and a disability insurance policy that is comparable in scope and coverage to a workers' compensation policy. The Insurance Commissioner shall determine whether a disability policy is comparable in scope and coverage to a workers' compensation policy.
  • A person holding the power to revoke a trust with respect to shares of a private corporation held in trust, or general partnership or limited liability company interests held in trust.
  • A general partner of a partnership or managing member of an LLC, must execute a waiver to opt out of coverage.
  • For those eligible – a signed waiver of coverage must be submitted to the insurance carrier within 15 days of the policy effective date.
  • Your waiver will remain in effect until you provide a written withdrawal to the insurance company. Existing waivers are not transferable to a new insurance company.

SB 189 excludes the owners listed below from the definition of “employee” but they may elect to be subject to liability for workers' compensation.

  • An officer or director of a private corporation who is the sole shareholder of the private corporation.
  • An owner of a private professional corporation who is the sole shareholder of the private professional corporation.

What this means to you

If your Workers Compensation policy is effective on 7/1/2018 or after, some of the requirements to exclude your officers, directors, managing members and general partners from workers' compensation coverage have changed. AB2883 changed the qualifications effective 1/1/2017, and SB 189 amends and adds to those qualifications. Signed waivers to opt out of coverage are still required, however the eligibility (and form) has been amended.

Waiver of coverage forms

For policies effective 7/1/2018 and after

For policies effective 6/30/2018 and earlier

As a qualified officer, director, managing member or general partner, you must personally file a waiver of coverage to be excluded. If you don't do so, you will be included in coverage and premium calculations.

Send completed forms to...

Send a scanned copy of your completed and signed waiver to (Note: This is an image to avoid spam.)

Frequently asked questions

We hope these FAQs help answer your questions. Simply click to expand each topic!

No. Previously submitted written waivers of workers' compensation coverage accepted by ICW Group remain in effect until there is a written withdrawal or you no longer have an inforce policy with ICW Group.

  • Policies with an effective date of 7/1/2018 or after
    • Signed waiver is due on the effective date of the policy.
    • Waiver is effective as of the date of acceptance by the insurance carrier, however, there is a 15 day grace period that allows us to accept the waiver up 15 days prior to acceptance.
  • Policies with effective dates of 6/30/2018 and before.
    • Signed waiver is due on or before the effective date of the policy
    • Waiver is effective as of the date of acceptance by the insurance carrier

Yes. According to the requirements each individual has to sign their own waiver.

Unfortunately, no. You must sign a separate waiver for each company type. One for the corporation, one for LLC /Partnership.

Simply refer to the Waiver Forms section above to download the appropriate form you need. Please make sure the waiver you select is the proper entity type (Corporation or Partnership/LLC) for your company.

Yes. A copy of SB189 is located on the California Legislature website: Senate Bill No. 189. You may also refer to the California labor code section 3351

Yes. These specific requirements are for California only at this time.

If your Workers' Compensation policy is effective on 7/1/2018 or after, you're automatically excluded from coverage. You may however, elect to be covered by signing a document stating you wish to be covered. If your policy was effective between 1/1/2017 through 6/30/2017, you would've been automatically included unless you signed and submitted a waiver of coverage.

Because SB 189 is effective on policies with an effective date of 7/1/2018 and after, the officer owning 10% stock was not eligible for exclusion. For your next policy period as long as after 7/1/2018, you can submit a waiver and that officer will be able to be excluded.

Great question. Depending upon the percentage change, it may impact your waivers. You'll want to contact your agent to check.

Only general partners can be excluded under the new rules. Partnership in a company that is the owner or partner of another business does not constitute direct ownership. You should reach out to your legal advisor or your agent for more advice on this question.

SB 189 now allows a person holding the power to revoke a trust to opt out of coverage. See the Waiver Forms section above for forms and details.

All shares that are issued directly in your name are included in the 15% ownership calculation (Policies effective 1/1/2017 – 6/30/2018); 10% ownership calculation (Policies effective 7/1/2018 and after).

If there were no exclusions on your policy, then this change to the labor code will not affect your policy.

No, this requirement no longer exists.

If an officer is not active and not paid, they would not be defined as an employee. They would not be included in your premium or at audit, and do not require a signed waiver.

Exclusions only apply to the company where the officer or director owns 15% or more (policies effective 7/1/2018 and after)/10% or more (policies effective 1/1/2017 – 6/30/2018) of the stock, is the managing member of a LLC or the General Partner in a partnership. The exclusion will not apply to subsidiaries or affiliates that are owned by the company, LLC or partnership. You should reach out to your legal advisor or your agent for more advice on this question.

No. Limited partners cannot be excluded.

If the waiver is not signed, it may affect your premium. The premium adjustment will be done at final audit, unless you request it be done sooner.

The changes to the CA Labor code have no impact on your officers in other states. You don't need to submit signed CA waivers, however, you may want to check with your agent for the rules of the applicable state.

At this time, the law doesn't allow us to waive the premium.

If you submitted waivers and ICW Group accepted them in 2017, please use the Contact us for AB 2883 to provide that information us and we'll look into it. If the officers did not complete waivers, we won't be able to revise the final audit; however, we'd love to help you get the waivers issued on your current policy to ensure that the officers will be able to be excluded in the future.

Want more information?

If you still have questions or need more information, see: Contact us for AB 2883.