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AB 2883: Making It Harder For Officers/Partners To Escape the Comp System

Hello dear readers!

As you all know, once in a while I do a blog post here or there on the subject of workers’ compensation. As wonderful as a system as it is, there is a tiny class of Californians that are cruelly denied its benevolent coverage.  I’m speaking, of course, of those entrepreneurs and titans of industry –the small business owner, the partner in a law firm, the shareholder and officer of a corporation – the guys that make the world go round!

Under Labor Code section 3351(c), the term “employee” does NOT include the officers and directors of a private corporation where those officers and directors are the sole shareholders of the corporation, unless they elect to be.  The same goes for “all working members of a partnership or limited liability company” under subsection (f).

Well, the state Assembly Committee on Insurance has introduced AB No. 2883, which would amend sections 3351 and 3352, which would allow an officer/shareholder to be exempt from workers’ compensation coverage only if he or she owns at least 15% of the outstanding stock.  Both partners and officers would have to prepare a written waiver signed under penalty of perjury.

In short, AB 2883 would require action to be exempt from workers’ compensation, rather than requiring action to come under the workers’ comp rules.  Just for fun, ask anyone who has a hard time paying their bills if they would rather have workers’ comp coverage or a pay raise (or a job) and you’ll see why limiting the people who can opt out of workers’ comp even further is not a welcome move.

Your humble blogger respectfully submits that this is, to use a highly technical and legal-based term, a “bad law.”



Not every business owner is a savvy and handsome young adventurer like your humble blogger.  Right now, there are plenty of people who have businesses with no employees and who think (correctly) that they don’t need workers’ compensation insurance because they can automatically opt out.  That’s great – there’s no need for extra expenses and extra paperwork, especially when small businesses are trying to keep the lights on and make ends meet.

Imagine two gentlemen are equal partners in a house-painting venture with no employees.  What if one of them gets hurt?  Is there suddenly an “illegally uninsured” case to be had? Is there liability for whoever hired them as independent contractors to paint a house? Why are we even discussing this…?

I don’t know if this proposal was the result of lack of sleep or a fiercely competitive round of “who can draft the most ridiculous legislation possible” over at the state capitol, but in either case, this is bad law.

California is losing businesses (and residents) every year to other states.  No, they’re not fleeing from AB 2883, but AB2883 is another example of the thinking in Sacramento, and how divorced it is from the people trying to make a living in this State.

So, the next time you’re playing golf with your state assemblyman or drinking coffee with your state senator, mention that your humble blogger says to set AB 2883 on fire, and dance around the ashes singing: “Greg was right; you were wrong; you should have listened all along…”

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