Big Fight Anticipated Over Work Comp Day Labor Bill

A bill to provide workers' comp coverage to day laborers providing occasional work to homeowners is shaping up to be one of the major conflicts of the 2017 California legislative session, IIABCal Lobbyist John Norwood said.


AB 206 would eliminate the requirement under current law that a person who provides occasional work on behalf of the owner or occupant of a residential dwelling must have worked at least 52 hours for the employer to be liable in the prior 90 days and be paid at least $100 in order to be covered for workers' comp insurance under a homeowners or renters insurance policy.

Ironically, this threshold was established in 1977 in response to a public hue and cry over a bill passed by the Legislature to cover all occasional workers that perform maintenance work incidental to the ownership, maintenance or use of a residential dwelling including child care and housekeeping.

That bill was passed by the Legislature in 1975 but contained a delayed effective date of Jan. 1, 1977. There was such a public outcry about the potential cost and unfair subsidy that would result from the new law that early in 1977 by an urgency bill the Legislature modified the statute to narrow the coverage substantially.

The Legislature also required such coverage to be included in all homeowner and renter insurance policies to spread the risk.

SB 206 is authored by the powerful Chairwoman of the Assembly Appropriations Committee Lorena Gonzalez and sponsored by the California Applicant Attorneys Association. There are estimates ranging between 40,000-80,000 day laborers working in California who are hired by homeowners or contractors to assist in projects inside and outside dwellings.

“The author and sponsor argue that these workers need access to medical care and income benefits when they are unable to work,” Norwood said.  “The author also indicates that there should be very few claims under such expanded coverage so any increase in the cost of homeowners insurance should be minimal.

“Numerous insurers and insurance trade associations think otherwise,” Norwood said. “They point out that these day laborers most often provide work more akin to construction projects where the rate for workers' compensation coverage is much higher than for nannies or housekeepers.”

In addition, they argue that most of this work is in the underground or cash economy, thus the likelihood of fraud is extremely high, he said. Moreover, there are simply no statistics available that could establish an adequate rate for this coverage.

Lastly, imposing this additional cost on all homeowners is regressive in nature as the great majority of policyholders in the state would be subsidizing the those higher income households that are more likely to hire contractors that use day labor for improvements to their homes or rental properties, Norwood said.

“Another set of concerns being leveled against this bill is its adverse effect on legitimate licensed and insured contractors and that it will result in a further competitive advantage to those who operate in the underground or cash economy.”

Norwood said one of the principle disincentives to a homeowner hiring unlicensed or uninsured contractors is that the homeowner would be liable in tort for the cost of any person injured on his or her property or dwelling.

“By including workers' compensation coverage in the homeowners or renter’s policy that would cover such individuals, the homeowner or renter can take advantage of the exclusive remedy of such injuries being covered by the workers' compensation policy.

“The contractor who hires day laborers would have the advantage of the homeowner of renter paying the workers' compensation premium whereas the licensed and insured contractor is stuck paying for his or her own workers' compensation coverage and other social insurance and employment taxes.”

AB 206 is expected to be heard in the Assembly Insurance Committee the third week in A