A bill signed into law that will go into effect Jan. 1, creates some paperwork for partnerships and LLCs. The bill will create larger problems for any employer who has saved workers’ compensation premium by awarding a small percentage of ownership to key staff and then excluded them from workers’ compensation coverage.
AB 2883 was designed to target situations where some businesses have been claiming excessive number of employees as officers in order to get around insuring them for workers' comp.
The bill would revise allowable exemptions from the definition of an employee to only apply to an officer or member of the board of directors, if he or she:
- Owns at least 15% of the issued and outstanding stock of the corporation,
- Or an individual who is a general partner of a partnership or a managing member of a limited liability company, and that person elects to be excluded by executing a written waiver of his or her rights under the laws governing workers' compensation, stating under penalty of perjury that he or she is a qualifying officer or director, or a qualifying general partner or managing member, as applicable.
This new law removes the condition that in order for owners to have the option to exclude themselves from workers’ compensation coverage, 100% of the ownership must be active in the business and receiving remuneration. Starting January 1, 2017, silent partners/owners have no effect on the owner exclusion option.
The provisions of this law will apply, even to policies that were effective prior to January 1, 2017. Workers’ compensation policies have a provision that allow for changes in law to change the coverage contract.
Call BRMS with any questions at (323) 571-0127.