Effective January 1, 2017, California has amended the definition of an employee under Workers’ Compensation law and who can elect to be excluded from having workers’ compensation coverage. Specifically, an officer or member of the board of directors of a corporation must own at least 15 percent of the issued and outstanding stock of the corporation to be eligible to elect to be excluded from having workers’ compensation coverage.
Any corporate officer owning less than 15 percent of the issued and outstanding stock of the corporation will not be eligible to elect exclusion. Individuals who are general partners of partnerships or managing members limited liability companies (LLC’s) can elect to be excluded irrespective of ownership percentage, but must sign a written waiver under penalty of perjury making the election. Any corporate officer, member of the board of directors, general partner, or managing member of an LLC electing to exclude themselves must execute a waiver stating, under penalty of perjury, that they are a qualifying officer or director, general partner, or managing member of an LLC. The signed waiver must be on a form approved by the California Department of Insurance.
“AB 2883 is going to cause significant disruption for workers’ compensation insurers and employers,” said California Insurance Commissioner Dave Jones back in mid-October. “We have issued a notice today to workers’ compensation insurers so that they know what the new law requires of them and we directed insurers to provide notice to employers so that they are made aware of the new law. Unfortunately, AB 2883 did not include any language exempting in-force policies or delaying its effective date so as not to impact in-force policies.”
Prior to the passage of AB 2883, officers, directors and working partners were not required to be covered under the business’s workers’ comp policy unless they opted to be covered and were not listed on a limiting and restricting endorsement.
Contact your local insurance agent/broker for further details.