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Failure to provide work comp insurance can result in trouble for California contractors

In workers' compensation defense news, the Contractors State License Board and the California Professional Association of Specialty Contractors are joining forces to remind both builders and general contractors about the need to confirm work comp coverage.

Specifically, they are reminding these groups to ensure that any subcontractors they hire are providing the necessary workers' compensation insurance.

Failure to do so can now result in fairly severe consequences thanks to Senate Bill 1254, which went into effect on the first of the year.

In addition to handing down steep fines, the new law grants the Contractors State License Board the following powers:

  • The ability to hand out stop work orders to employers that fail to provide mandatory workers' compensation insurance
  • The ability to suspend the license of any contractor who fails to provide mandatory workers' compensation insurance

In addition to granting these increased powers, Senate Bill 1254 also provides the Contractors State License Board with more peace officers to perform field inspections, bringing the total number to 12 (there were only three before).

A letter outlining the provisions of the new law will be sent to prime contractors.

"We are putting contractors on notice and will be aggressively enforcing these laws," said David Fogt, chief of the enforcement division of the board. "If we find uninsured employers, a stop work order will be issued to the employer, and employees will be required to leave the project with entitlement to 10 days pay. In addition, the contractor may face legal action, including steep fines and possible suspension of the contractor's license."

(Interestingly, a recent trip to 305 construction sites across 22 counties by the California Division of Labor Standards Enforcement demonstrated that roughly 25 percent were lacking mandatory workers' compensation insurance.)

The California Professional Association of Specialty Contractors expressed its support of cracking down on these illegal practices and urged compliance among its members.

"We are concerned that some general contractors, builders and subcontractors are choosing to engage in dishonest business relationships, including not obtaining workers' compensation insurance and under reporting employees and cash payments," said Brad Diede, chief executive officer of the association. "Subcontractors who opt to participate in these practices submit low bids that don't cover primary wages or workers' compensation costs and ultimately cost the state."

Stay tuned for further developments in the area of workers' compensation defense ...

This post was provided for informational purposes only and is not to be construed as legal advice.

Related Resources:

Contractors urged to verify workers' compensation insurance (Sacramento Business Journal)

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