CDI Issues Directive on New Workers’ Comp Law Pertaining to Excluded Employees

The California Department of Insurance has notified the Workers’ Compensation Insurance Rating Bureau of its concern that some insurers may be in violation of Assembly Bill 2883.

The law, which went into effect on Jan. 1, excludes an officer or member of the board of directors of a private or quasi-public corporation from the definition of an employee if he or she owns at least 15 percent of the issued and outstanding stock of the corporation and executes a written waiver of his or her rights stating under penalty of perjury that the person is a qualifying officer or director.

Some experts have said that not only does AB 2883 present implementation problems for insurers, it presents an errors and omissions issue for insurance agents and brokers, especially with those entities that today do not purchase a workers’ comp policy because only the owners are involved in the business.

The bill also excludes a general partner of a partnership or a managing member of a Limited Liability Company who executes a written waiver stating under penalty of perjury that the person is a qualifying general partner or managing member. A waiver is effective upon the date of receipt and acceptance by the insurer and remains effective until the individual provides the insurer with a written withdrawal of the waiver.

The CDI indicated in letter to the WCIRB last week that “… the provisions of AB 2883 applied to all in-force policies as of January 1, 2017”, that “…unless a duly executed waiver was received and accepted by the insurer on or before January 1, 2017, any employee that may have otherwise been eligible for an exemption was required to be added to the coverage provided by the insurer” and that “… ‘backdating’ waivers … would constitute an unlawful business practice and a violation of Labor Code section 3352.”