Posted on 01/01/2017 9:23:56 AM PST by Kaslin
With California in full revolt against the incoming Trump Administration swearing to go to war with the other 49 states, the elected Leftists who run the state struck again against small businesses in the state. The government enacted 900 (yes, you read that correctly) new laws for 2017. One they snuck under everyone’s nose is a revision of the very expensive worker’s comp system.
As you probably know worker’s compensation insurance is paid by employers to cover medical costs for an employee getting injured on the job. It is a sure bet, as you suspected, that California has the costliest worker’s comp rates at $3.24 per $100 of payroll. The next most costly state is New Jersey which is 10% lower ($2.92 per $100). To give you an idea what the insurance rate is in sane states the rate in North Dakota is about 25% of California ($.89 per $100) or Indiana at $1.06 of $100.
This cost has contributed to driving businesses out of state and having existing employers avoid paying the rates like the Plague. Because making claims in California are so easy and adjudication of claims is so pro-employee, rates often rise for employers after they make their initial payments. As an employer you want to avoid this cost especially for owners of your corporation or partnership (LLC). Owners would almost never use anything other than their personal medical policy to cover any medical costs so they could avoid this secondary medical system and the related costs. No more in California.
Without much fanfare the state’s elected officials have changed the rules for owners of business as to whether they need to incur the extra worker’s comp premiums for themselves or other owners (quite often family members). Supposedly, there was rampant abuse with business owners making people either partners, corporate officers or directors to avoid paying the country’s highest worker comp premiums. Instead of fixing the system or punishing the abusers, California elected officials decided to punish everyone – the typical Leftist solution. This time Republicans were complicit as the vote of the State Assembly was 78-2 and State Senate 37-2 in favor of the bill.
Here is what they changed. You now must be a 15% owner of your corporation, partnership or LLC to be exempt from the worker’s comp system. In addition, you have to sign a form, under the penalty of perjury that you meet this rules and are exempt. If you are a general partner or managing member of an LLC, you are exempt. In fact, with a LLC which has become the most common form of business entity in California you have to not only be a 15% owner but also managing member of your LLC. This makes you more liable under other laws for the operation of the LLC.
Californians will not be aware of this until they go to renew their worker’s comp policies. Many owners may be notified by their insurance companies as the law takes effect January 1, 2017, but confusion reigns. The only reason I became aware of the new law was because my son and I are starting a new business. The insurance company for my wife’s company did not notify us.
Let me give you an idea of what is in store for everyone. Say ten partners start a business each owning 10%. They all get a salary which is referred to as a guaranteed payment because partner’s get paid differently than employees. Let us say they each have guaranteed payments of $100,000 (not big money in California). None of the partners would qualify to be exempt from worker’s comp. Based on the average rate for California of $3.24 per $100 the partnership would have a new expense of $32,400 for worker’s comp insurance for a plan that none of them want and they will probably never use. Quite a penalty for being a California located business and for the fact the legislature decided to penalize everyone for a few behaving badly.
I have clients who are members of medical partnerships or law partnerships that make much more money than that and will be subject to higher amounts of worker’s comp premiums used in the example above. These will be huge new costs for the owner/operators of businesses.
In fact, I contacted one business and initially they told me their insurance agent told them they could all sign waivers when they renew in June. I told them no, no, no. They had a new discussion with their agent and they have come to the reality of the fact they will be incurring a cost of $90,000 they did not previously have for coverage NONE of the new people covered will ever use.
It is extremely difficult to find out anything about this law as most businesses are clueless as well as the insurance companies. I called two insurance companies and they were almost no help. I worked my way up to the head underwriter at one fairly sizable insurance company. She was the first person I have spoken to who seemed to know what the new rules were.
She told me some officers and owners actually want to participate in the worker’s comp system which was news to me as everyone I know or have talked to does not see any benefit for them to the additional insurance. She also verified that the rules say that if you do not qualify for the waiver there is a minimum and a maximum for how much a previously exempt person would have to pay.
The previously exempt person would have to pay on a minimum of payroll of $48,100 and a maximum of $122,100. That means if you have $10,000 of payroll you still have to pay on the $48,100 minimum and if you have $300,000 you are capped at $122,200. At the average worker comp rates, you would have to pay a minimum of $1,558 and a maximum of $3,953 into a system the vast majority of people covered by this new law will never use.
Happy New Year to everyone in California. And to you in the other 49 states Happy New Year and say hello to your new California neighbors who will soon be coming your way.
Move businesses to Texas. There is no requirement for Workers Comp Insurance.
When the Latino democrats outnumber and replace the old white dems who invited them, CA will look a whole lot different, kind of like Mexico, where you don’t see all these utopian laws.
Jefferson will be a low tax, small government, free enterprise State.
Republicans and Conservatives have much richer targets than Workman’s Comp.
And such bad optics.
How about Northern CA join Northern Nevada. We give California Clark Co. in exchange.......
How was the state of The Gipper sunk so low?
My cousin had a business in Truckee, California. He wanted to expand his shop. All the rules and regs in California became to onerous to him. He moved his business to Nevada. He took his essential employees with him and the rest no longer had a job.
California’s rules and regs is why they no longer have a job. Nevada did everything they could to assist him in moving his business. Nevada expedited all the permits and paper work for him. Nevadans now have those 50 jobs.
California has an economic death wish!
Quote:
“Just more reasons why those of us in Northern California want to start our own state, The State of Jefferson.”
How does this work? Marin, Sonoma, Mendocino, and Humboldt Counties are liberal-leftist to the max.
Hey, this could really stimulate the economy out there. Medical groups will now have no more than 8 providers. Think of the trickle down effect ... more work for the attorneys in setting up those numerous new LLCs, more work for the printers who will print the new business cards and letterhead, more work for the advertising magnates who must craft the new TV and print ads, more work for the accountants who will have more tax returns to work on, more ... more ... more ... /sarc off
In my years working foe a PEU in CA I know they are behind this. They fought for everyone getting workers comp for anything, disease or accident, totally unrelated to work, being the fault of the employer. If nothing else it was the stress caused by having a job.
The country of Switzerland has solved this problem long ago.
Employers all pay all accident insurance for employees. Not on the job accidents only: all accidents. Believe it or not, this is cheaper. There is no industry trying to milk employers. It’s a part of the cost of doing business but it hasn’t hurt anyone. There is up to two years of paid disability for accidents but even though there are many sport injuries, people don’t want to stay home longer than needed. Most injured return to work asap. Cottage industry, lawyers NOT NEEDED. Saves millions.
Yep. And, we won’t have a year around legislature.
Correcting the mistakes of California and others,
Jefferson will be among the most successful states within
ten years.
CALexit 2018 is the best solution
I run a small business in California. Tomorrow I get to deal with this:
California: Unisex restrooms required by new single-stall law
Forget the men’s room and the women’s room. Gender will no longer matter when using single-stall public bathrooms in California.
Gov. Jerry Brown on Thursday signed legislation that will require restrooms for single users to be designated all-gender, California’s latest move to bolster transgender rights even as much of the country moves in the opposite direction.
http://www.mercurynews.com/2016/09/29/california-unisex-restroom-single-stall-law-jerry-brown/
The other extreme? That’s no good either.
Nah, better to just deport all the illegals and punish employers in Clark Co. for hiring them. We don’t want to make a screwed state like CA bigger; we need to figure out a way to make it 5-6 different states so it doesn’t damage so many people in one fell swoop.
Better yet; find a cure for liberalism. I’m not opposed to some form of frontal lobotomy if it allows them to function and carry their own weight. We still need cleaners and ditch diggers.
Exactly. Love the idea of the state of Jefferson or even 5-6 new states but the split(s) should be more East / West for Calif. Not North / South
Liberals are ruining a once-great state one law at a time. There’s no reason to live in California.
Reason 816 why I’m glad I don’t live in CA. My condolences to those FReepers who do.
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