Grinberg: Comp Insurance coverage for All Licensed Contractors| Employees Compensation Information

By Gregory Grinberg

Thursday, January 21, 2021 | 80 | 0 | min read

Please allow me to use the mighty soap box to once again denounce the machinations of our friends in Sacramento.

Gregory Grinberg

Now I know for sure that when I denounce what they are doing in Sacramento, a lot of things come to mind without limiting the scope. So let your imagination run wild.

But since I took the trouble to write this blog, perhaps you will allow me to force you to finish reading it. In this particular case of outrage and fear, I rail against the proposed Senate draft 216.

What does SB 216 have to do with employee compensation? Well everything.

Workers’ compensation insurance is only required for those who have workers (although there are some exceptions, such as roofers). The self-employed can cancel insurance, as can companies without employees.

Why would anyone want to decline insurance? Well, as I learned through the growing up process – and even more so through the growing up of a cynical adult – most questions that start with “why” can be answered with “money”.

When a licensed contractor has no employees, there is pressure to keep costs as low as possible in order to be as competitive as possible on offers for services. Taking out employee compensation insurance means increasing the cost of quotations and making the independent contractor less competitive. Similarly, a licensed contractor’s request for volcano insurance would have a similar effect.

To be fair, the rationale for the law holds up: many licensed contractors claim to have no employees, then hire staff from the books and leave their customers’ pockets in hand when a breach occurs. In this case, however, the remedy appears to be worse than the cure: adding another “tax” to licensed contractor operations, in which case workers’ compensation insurance is required when there are no employees, only results in more licensed contractors being brought into the operation become black market.

Because the more expensive the cost of complying with the law, the greater the incentive to break the law, right?

I sincerely hope that Sacramento lawmakers will refuse to translate this proposal into law. Navigating the California business environment is difficult enough, and living in California is expensive enough without incurring these additional and unnecessary costs.

Gregory Grinberg is the managing partner of Gale, Sutow & Associates’ SF Bay South office and a certified specialist in employee compensation law. This post was reprinted with permission from Grinberg’s WCDefense CA blog.