California Work Comp Exclusion Rules
7/1/2018 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.
Summary of the law
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
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’ll be included in coverage and premium calculations.
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