- from the California Licensed Contractor, Contractors State License Board, Summer 2012
Licensees are strongly encouraged to review CSLB’s website (www.cslb.ca.gov) to make sure the publicly disclosed information in their profile(s) is accurate, especially workers’ compensation (WC) insurance details. Approximately 60 percent of CSLB’s licensees have a WC exemption on file. An exemption is a statement, signed under penalty of perjury, that verifies a contractor has no employees. A WC exemption is common upon initial application for a license. However, licensees are required to notify CSLB and provide evidence of WC when they eventually hire workers.
CSLB has approximately 170,000 exemptions on file, which is a flag that many contractors either are failing to notify the board of their policy or are employing workers without obtaining a policy. CSLB works closely with the Department of Insurance to investigate and take disciplinary action against contractors who violate WC requirements.
The penalty for having an employee and not having a policy is provided in Labor Code section 3700.5 and Business and Professions Code section 7125.4. It is a misdemeanor to not have a policy, so violators can be criminally charged; in addition, if CSLB finds that a contractor has an employee without a policy, a construction site stop order will be issued. He/she will be required to obtain a policy before resuming any construction project that includes workers.
To obtain a WC policy, contractors need to call the State Compensation Insurance Fund or any of the private WC insurance companies.
Another important step when a contractor has employees is to properly report payroll to their insurance carrier. Contractors need to provide that information to the carrier either monthly or quarterly. Based on the payroll, the insurance company will assess the contractor’s premium. Underreporting one’s payroll for the purpose of receiving a lower WC premium is a felony in California. When WC insurance and payroll are accurately reported by all contractors, the premiums cost less for all. In fact, the University of California DATA Survey Research Center in Berkeley has determined that contractors who are accurately reporting payroll to their insurance carrier are paying premiums of up to five times higher than they would be if their competitors were accurately reporting their payroll. CSLB Enforcement staff is identifying these violations through consumer complaints, license and insurance compliance checks at job sites, and by working closely with other state agencies, including the Department of Insurance, Employment Development Department, and the Department of Industrial Relations.
Don’t take the risk!