How California Came to Make a Mess of a Law

I recently wrote a column about a law that California put into force on January 1, 2017, that requires certain small business owners to acquire workers’ compensation insurance that most or all will never use. This is an added cost for the small businesses that will only inure to insurance companies and in the end drive up costs to consumers. After publication of this column, I learned more about the passing of the law which was fascinating to me and hopefully will be fascinating to you.

The bill, AB 2883, sailed through the legislature with virtually no discussions and near unanimous consent. Apparently, after the bill was signed into law, a firestorm of concern regarding the effects of the bill were expressed. As was told to me by Mark Rakich, who works for the legislative committee that generated this bill, this was “A perfect storm of competent and well-tuned organizations messing up.” Mr. Rakich had read my column and initially was less than friendly, but after we talked out the matter he was very instructive. In fact, SB189 is now being worked through the current session of the California Senate to make corrections to last year’s bill. The problem is we do not know the final wording of that bill. What we do know is a law that possibly should have never been passed will be hard to alter because existing constituencies will want to maintain what they have established.

This bill was generated by the Association of California Insurance Companies (ACIC). I spoke with Mark Sektnan, President of ACIC. He stated that the genesis of the bill was that some of his members complained about the fact that some of the companies they insured had claimed low-level employees were exempt from workers’ comp insurance by naming them as officers or directors of the company. When asked if he had developed a study to determine how frequently these improper actions occur, he said he had checked with other members of his association, but only had anecdotal evidence. That was enough to generate a bill. It was modeled after laws in place in some other states, but set more restrictive requirements in California.

The bill was sponsored by the committee, not a specific member of the Assembly, because it was generated by a third party. It was sent out to the usual interested parties for review and was published for others to review. The response was a resounding thud. I told the people behind the bill next time call me, because it took me about half a minute to realize the negative impact of this bill. Since no one crabbed about the bill it sailed on.

The most likely suspects to complain about the bill were professional groups such as the California Dental Association or the California Medical Association. The California Chamber of Commerce did not blink when reviewing the bill. The group I spoke to was the California arm of the National Federation of Independent Business (NFIB). Ken Devore, State Legislative Director, was very helpful in describing how this was missed by his group. While not excusing the overlooking of this bill, he says he farms out anything on Workers’ Comp to a consulting firm he has because he just does not have enough understanding of the subject. He also stated he can be tracking 500 bills at one time and it is challenging to keep up on all of them. Many times they get altered in committee and become significantly different from their original form.

Let us digress for a moment and focus on two issues. First, the ridiculous number of bills that are offered in the California Legislature. It is a fact, as stated by the NFIB, that there are approximately 5,000 bills introduced in every two-year session of the legislature. That not being enough, the Assembly voted themselves the right to introduce an additional 10 bills per member which adds 800 potential bills to the existing total. Last year Governor Brown signed nearly 1,000 bills into law. How can anyone keep track of all these bills and/or how have they changed the lives of residents? This is why so many people break laws because very few people know the rules.

The second point is that I am going to offer a full-throated defense of a dirty word in America today – lobbyists. You can say we should not need lobbyists, but that would leave us blind regarding most actions in our legislatures or the U.S. Congress. The only way people can protect their interests in these matters is to hire someone who is knowledgeable to follow these bills and speak for us. We cannot be following each one of these bills whether we run a business, union, or are just an average citizen involved in an issue important to us -- whether it be workers’ comp laws or protecting animals. The only way to get rid of lobbyists is to massively shrink the government at all levels and that is unfortunately not going to happen. Eliminating lobbyists is a fool’s errand.

There was apparently another Workers’ Comp bill (SB 1160) last session which was the focus of the people who follow Workers’ Comp in California. This had to do directly with controlling the costs, which as stated in my last column are the highest in the nation. It is obvious why many want to circumvent paying the required costs. For many businesses Workers’ Comp costs are staggering.

We have to hope that a new bill will lessen the harsh effects of AB2883. As long as we have 2,500 or more bills being authored a year and 1,000 signed into law, then we will have a mass of either misunderstood consequences or unintended ill consequences -- both are a good argument for a part-time legislature.

A friend has her rental houses owned by her LLC. The state said she and her husband have to get unemployment insurance. It is pointless. It is a tax. But she had to comply.

Just about everything the state and counties do adds a fee to the landlord which must be passed on to the renters. Rent in my rural county has gone up about 30% in the last eight years. Garbage, water, real estate taxes all up. I am at the bottom end of the market; Walmart employees, laborers, retired folks. They can’t afford the increases.

The article seems to me to be tortured, hard to
understand. However, the photograph rang a familiar
bell with me. The name of the business “The Fur Trader”
matches the name of a business in my quaint, little
home town. Then I focused on the derelict character
face featured under the California flag and I recognized
a cohort from high school who now owns a number of
commercial buildings in this quaint tourist town. I
recall over 50 years ago he and my mom and dad would
exchange jokes and jabs.

“”The state said she and her husband have to get unemployment insurance””

I don’t think there is such a thing....it could be they aren’t paying unemployment taxes to their state OR the feds - dependent on payroll figures but the article is about WORKERS COMP INSURANCE - coverage for employee injuries on the job. The owners would be exempt as officers from the rate but they no doubt have to hire people for maintenance and repairs on the rental houses.

“...the genesis of the bill was that some of his members complained about the fact that some of the companies they insured had claimed low-level employees were exempt from workers’ comp insurance by naming them as officers or directors of the company. When asked if he had developed a study to determine how frequently these improper actions occur, he said he had checked with other members of his association, but only had anecdotal evidence.”

So an issue for a few people, which was not studied as to consequences, got put into legislation & passed which screwed things up for no doubt thousands of others. CA needs a citizens initiative requiring a study on impact - economic or otherwise - for every piece of legislation BEFORE it can be voted on & become law. Actually, every state should have such a requirement. Our legislators are not experts & usually cause more Unintended Consequences with their legislation than a benefit.

Sorry that is a nothingburger of a story. No hard facts. No numbers. No usable statistics. I might actually be sympathetic - but to what? We should be able to do better, but this could exemplify why California is a one party State. Who is the leader of the opposition to the Democratic cabal in Sacramento and what is their attitude to this? Come on California GOP - wake up!

“”They should have their own insurance””

I’m going to assume (yes, I know it’s dangerous) that by referring to “they” you mean workers at the rental houses. I would think those “workers” wouldn’t be contractors/sub contractors as much as they would be illegal aliens in which case they wouldn’t have ANY insurance - not even auto insurance to drive to their job....

Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.