|Amends Made To SB 189 (Bradford)
During the time immediately preceding the recess, Senate Bill 189 (Bradford) went through a series of amendments. Entering the summer recess, the bill made the following changes:
(1) Ownership of issued and outstanding shares in corporations was reduced from 15 percent (current law) to 10 percent. This would be effective January 1, 2018.
(2) Ownership interests held in trust were reinstated for purposes of eligibility to execute waivers.
(3) Special rules for professional corporations (PCs) were developed so that owners would not have to meet a specific percentage of ownership. However, PCs owners would have to have health insurance and notify all other owners to execute a waiver. The percentage ownership change and health insurance requirement would be effective July 1, 2018.
(4) An insurer or a producer is under no obligation to verify the accuracy of the waiver.
(5) The person executing the waiver is conclusively presumed not to be covered under workers’ compensation.
(6) An insurer could backdate acceptance of the waiver up to 15 days prior to receipt.
(7) Various provisions were added to coordinate the effective date of new provisions with the inception dates of insurance policies.
Amendments dated August 21, 2017:
Corporations. Effective January 1, 2018, corporate officers or directors may execute a waiver of workers’ compensation rights and benefits if they own at least 10 percent of the issued and outstanding stock of the corporation. This is the general rule. (No change from prior version of bill)
For some corporations, there are different special rules:
(1) Professional Corporations (PC). The owners of a PC no longer have an ownership threshold requirement to execute a waiver, which means any ownership is sufficient. However, the owner must have health insurance and the waiver must be delivered to all PC owners. The PC must also keep a copy of the waiver(s) on file. (Deletes the July 1, 2018 delayed effective date of the ownership threshold and health insurance requirements. Would become effective January 1, 2018 if chaptered)
(2) Family Ownership. An officer/director of a corporation need have only 1 percent of issued and outstanding stock to execute a waiver if that officer’s or director’s parent, grandparent, sibling, spouse, or child owns at least 10 percent of the issued and outstanding stock of the corporation and the officer or director has health insurance. (New Language)
Note that for ownership interests held by family members that would allow an officer/director to have less than 10 percent of issued and outstanding shares to execute a waiver, the language does not say that the ownership by the family members could be held in trust. That would seem to be an oversight.
The language also suggests that an individual family member must own 10 percent, rather than family members cumulatively owning 10 percent. Not sure if that is the intent.
(3) Cooperative Corporations. The officers and directors of a cooperative corporation no longer have an ownership threshold requirement to execute a waiver, which means any ownership is sufficient. However, the officers/directors must have health insurance and the waiver must be delivered to all other officers/directors. The Cooperative Corporation must also keep a copy of the waiver(s) on file. (New Language)
(4) Sole Shareholders. A sole shareholder would no longer have to execute a waiver. The amendments reinstate the law for these shareholders as existed prior to AB 2883 (Insurance Committee) and would make them subject to workers’ compensation rights and benefits only if they filed the document accepting workers’ compensation required by Labor Code Sec. 4151. (New Language)
Partnerships and LLCs. There are no new changes in the substantive provisions from prior versions of the bill.
“Grace Period”. The Leg Counsel digest mentions a “grace period” which really addresses when waivers become effective. For all entities (corporations, partnerships, and LLCs), “…a written waiver that is executed on or after January 1, 2018, pursuant to this subdivision, and that is accepted by the insurance carrier on or before December 31, 2018, shall be deemed to be accepted by the insurance carrier as of January 1, 2018.” (New Language)
The new language would seem to say that anyone can execute a waiver as of January 1, 2018 regardless of policy inception date. This likely would only be an issue for corporations. In other words, if a person who could not execute a waiver prior to January 1, 2018 is eligible execute one on January 1, 2018, s/he could do so regardless of policy inception date and it would be effective January 1, 2018. This could be significantly disruptive.
This language deletes the prior language regarding effective dates for insurance policy purposes.
Waiver valid until withdrawn. Language is retained.
Backdating. Language is deleted, likely due to the “grace period” language.
No duty to verify. Language is retained.
Conclusive presumption. Language is retained.
Ownership held in trust. Language is retained.