California Work
Comp Coverage
Rules

Two bills signed into law in California in 2017 changed the definition of the term “employee” in the California Labor code. This, in turn, affects who can and can’t be excluded for Workers Compensation purposes. Senate Bill 189 (effective 7/1/2018) revises Assembly Bill 2883.

Summary of the law

SB 189 changed Labor Code Section 3351. It also revises some of the changes made in 2017 (AB2883) to the same Labor Code section. This could impact you if you currently exclude or include any officers, board members, LLC managing members or general partners from coverage. SB 189 changes are applicable to policies with effective dates of 7/1/2018 and after.

Summary of requirements:

SB 189 allows exclusion of the owners listed below with signed waivers:

  • Corporate officers and members of board of directors who owns at least 10% of the issued and outstanding stock; and is covered by a health insurance policy or health care service plan.
  • Corporate officers and members of board of directors who owns at least 1% of the issued and outstanding stock of the corporation if his or her parent, grandparent, sibling, spouse, or child owns at least 10 percent of the issued and outstanding stock; and is covered by a health insurance policy or health care service plan.
  • An owner of a professional corporation, who is a practitioner rendering professional services for which the professional corporation is organized (i.e. Medical Group, Law Firm, etc.); and stating that he or she is covered by a health care service plan or a health insurance policy.
  • An officer or member of the board of directors of a cooperative corporation organized pursuant to the Cooperative Corporation Law; and stating that he or she is covered by a health care service plan or health insurance policy, and a disability insurance policy that is comparable in scope and coverage to a workers’ compensation policy. The Insurance Commissioner shall determine whether a disability policy is comparable in scope and coverage to a workers’ compensation policy.
  • A person holding the power to revoke a trust with respect to shares of a private corporation held in trust, or general partnership or limited liability company interests held in trust.
  • A general partner of a partnership or managing member of an LLC must execute a waiver to opt out of coverage.
  • For those eligible – a signed waiver of coverage must be submitted to the insurance carrier within 15 days of the policy effective date.
  • Your waiver will remain in effect until you provide a written withdrawal to the insurance company. Existing waivers are not transferable to a new insurance company.

SB 189 excludes the owners listed below from the definition of “employee,” but they may elect to be subject to liability for workers’ compensation.

  • An officer or director of a private corporation who is the sole shareholder of the private corporation.
  • An owner of a private professional corporation who is the sole shareholder of the private professional corporation.

Sending in your waiver of coverage forms

Email a scanned copy of your completed and signed waiver below to: SCEprocessing@icwgroup.com

As a qualified officer, director, managing member or general partner you must personally file a waiver of coverage to be excluded. If you don’t do so, you’ll be included in coverage and premium calculations.

Helpful Resources

Frequently Asked Questions

General

How exactly will this affect my premium and when?

If the waiver is not signed, it may affect your premium. The premium adjustment will be done at final audit, unless you request it be done sooner.

What if I have multiple states on my policy and my officers are in a non-California entity?

The changes to the California Labor code have no impact on your officers in other states. You don’t need to submit signed California waivers, however, you may want to check with your agent for the rules of the applicable state.

How do we request that the premium be waived for our officers who have been included for coverage?

At this time, the law doesn’t allow us to waive the premium.

We’ve received our final audit and notice that you included our officers. What can we do to get this revised?

If you submitted waivers and ICW Group accepted them, contact us and provide this information and we’ll look into it. If the officers did not complete waivers, we won’t be able to revise the final audit; however, we’d love to help you get the waivers issued on your current policy to ensure that the officers will be able to be excluded in the future.

Waiver of Coverage

I already submitted a signed waiver and it was accepted by ICW Group. Do I need to submit another one for my renewal policy?

No. Previously submitted written waivers of workers’ compensation coverage accepted by ICW Group remain in effect until there is a written withdrawal or you no longer have an inforce policy with ICW Group.

What day is the waiver of coverage due and when will it be effective?

Policies with an effective date of 7/1/2018 or after

  • Signed waiver is due on or before the effective date of the policy.
  • Waiver is effective as of the date of acceptance by the insurance carrier, however, there is a 15 day grace period that allows us to accept the waiver up 15 days prior to acceptance.

Do I have to have a separate waiver for each person?

Yes. According to the requirements each individual has to sign their own waiver.

Can we add all our corporations and LLCs on one waiver?

Unfortunately, no. You must sign a separate waiver for each company type. One for the corporation, one for LLC/partnership.

How do I get a copy of the waiver form?

Simply refer to the waiver of coverage forms section of this page to download the appropriate form.

California Labor Code

Is there someplace I can go to find the statute/law?

Yes. A copy of SB 189 is located on the California Legislature website: Senate Bill No. 189. You may also refer to the California Labor Code Section 3351.

So this is for California only?

Yes. These specific requirements are for California only at this time.

Exclusions and Inclusions

What are my options if I am an officer who is also the sole stockholder?

You will automatically be included unless you sign and submit a waiver of coverage.

What if the ownership percentages change later?

Great question. Depending upon the percentage change, it may impact your waivers. You’ll want to contact your agent to check.

I’m a general partner of a business, and the partnership is a partial owner of another business. I’m currently excluded from this second business through my partner status. Can I continue to be excluded?

Only general partners can be excluded under the new rules. Partnership in a company that is the owner or partner of another business does not constitute direct ownership. You should reach out to your legal advisor or your agent for more advice on this question.

Our company is formed as a trust. Can we now exclude owners?

SB 189 now allows a person holding the power to revoke a trust to opt out of coverage. See the Waiver Forms section above for forms and details.

If I own shares through an “ESOP”, do they count toward the percentage of ownership necessary for exclusion?

All shares that are issued directly in your name are included in the 15% ownership calculation (policies effective 1/1/2017 – 6/30/2018); 10% ownership calculation (policies effective 7/1/2018 and after).

Am I prohibited from excluding anyone if non-officers own stock (open corporation)?

No, this requirement no longer exists.

What if officers own less than 10%, are not working and not paid?

If an officer is not active and not paid, they would not be defined as an employee. They would not be included in your premium or at audit, and do not require a signed waiver.

If I have a corporation that is wholly owned by an LLC, how does the exclusion work?

Exclusions only apply to the company where the officer or director owns 15% or more (policies effective 7/1/2018 and after)/10% or more (policies effective 1/1/2017 – 6/30/2018) of the stock, is the managing member of a LLC or the general partner in a partnership. The exclusion will not apply to subsidiaries or affiliates that are owned by the company, LLC or partnership. You should reach out to your legal advisor or your agent for more advice on this question.

Can I exclude a limited partner of a general partnership?

No. Limited partners cannot be excluded.

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