News

Notice of Change in California Labor Code

March 14, 2018

AB 2883 – Notice of Change in California Labor Code: Owner/officer Exemptions for Workers’ Compensation Policies

You may be aware that Assembly Bill (AB) 2883 went into effect on Jan. 1, 2017, and changed the California Labor Code relating to owner/officer exemptions for workers’ compensation policies. Senate Bill (SB) 189 was passed in October 2017 and made several substantive changes to these exemptions that will become effective on July 1, 2018.

For new and renewal policies incepting on or after July 1, 2018, the following changes will go into effect:

All Corporations

Officers or members of board of directors who own at least 10 percent of the issued and outstanding stock of the corporation are eligible for exclusion.

Family-Owned Corporations

Officers or members of board of directors who own less than 10 percent of the issued and outstanding stock of the corporation are eligible for exclusion if they:

• Own at least one percent of the issued and outstanding stock of the corporation; and
• Are related (parent, grandparent, sibling, spouse, child) to someone who owns at least 10 percent of the issued and outstanding stock of the corporation; and
• Are covered by a health insurance policy or a health care service plan.

Professional Corporations

Owners of professional corporations (as defined by CA Corporation Code Section 13401) are eligible for exclusion if the owners are:

• Covered by a health insurance policy or a health care service plan; and
• Are practitioners rendering the professional services for which the professional corporation was created.

Cooperative Corporations

Officers or members of board of directors of cooperative corporations organized pursuant to the Cooperative Corporation Law, as set forth in Part 2 (commencing with Section 12200) of Division 3 of Title 1 of the Corporations Code, are eligible for exclusion if they are covered by:

• A health insurance policy or a health care service plan; and
• A disability insurance policy that is comparable in scope and coverage, as determined by the California Insurance Commissioner, to a workers’ compensation policy.

Trusts

A person who holds the power to revoke a trust with respect to shares of a private corporation held in trust is eligible to execute a waiver under one of the conditions listed above.

Sole Shareholder

The statute clarifies that a sole shareholder of a corporation is not an employee and is not required to have workers’ compensation insurance.

Rules for Partnerships and Limited Liability Companies (LLCs) will not change. General Partners (Partnerships) or Managing Members (LLCs) are eligible for exclusion.

Every person who is eligible for exclusion and wants to exempt themselves from workers’ compensation coverage must still sign and complete a waiver certifying under penalty of perjury that he/she qualifies for exclusion, understands that the waiver will be effective upon date of receipt and acceptance by the insurer, understands that he/she will not be entitled to coverage under the workers’ compensation policy if an employment-related injury occurs, and that the waiver will remain in effect until the excluded owner/officer provides written withdrawal of the waiver to the carrier. Only one person requesting exclusion can sign per form.

Please review below to see how this will impact you and your policy.

You Submitted a Waiver Form to Us Previously

You will not need to do anything. All waivers are in effect until you provide a written withdrawal of the waiver.

You Are Eligible to Elect Exclusion Under the Revised Law

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Follow the requirements noted above and submit your signed waiver to your agent prior to your renewal date. Waiver forms applicable for new and renewal policies effective July 1, 2018 and later are attached. Your agent will submit your form to us along with any other renewal instructions.

If you have any questions, please contact your agent.

Download the Waivers

California Corporate Officer or Director Waiver, 2018-07

California General Partner or Managing Member (LLC) Waiver – 2018-07