Employers need to be aware that effective January 1, 2017 California Assembly Bill 2883 goes into effect, which changes California’s workers’ compensation law, regarding exemptions from the law by corporate officers and directors, partners, and limited liability company (“LLC”) members.
Specifically, officers and directors of quasi-public and private corporations who provide actual services to the corporation for pay are considered an “employee” of the corporation unless they elect to be excluded from coverage. See Cal. Lab. Code § 3351(c) (Eff. Jan. 1, 2017). However, now the officer or director can only elect to be excluded from coverage “if he or she owns at least 15 percent of the issued and outstanding stock of the corporation and executes a written waiver of his or her rights under this chapter stating under penalty of perjury that the person is a qualifying officer or director.” Cal. Lab. Code § 3352(p) (Eff. Jan. 1, 2017).
Also, working partners and LLC members who receive wages irrespective of profits are now considered employees, unless they exempt themselves from coverage. Cal. Lab. Code § 3351(f). General partners and LLC managing members may, under penalty of perjury, execute a written waiver of their rights under the California workers’ compensation laws. Cal. Lab. Code § 3352(q).
If you have any qualifying corporate officer or director, LLC managing member or general partner, who desires to be exempt from California workers’ compensation coverage, they must sign the appropriate waiver.
If you have any officers, directors, LLC managing members or general partners who were exempt from California workers’ compensation coverage prior to the January 1, 2017 law change, they must submit the waiver to continue that exemption, provided that they meet the qualifying requirements. This applies to in-force policies and renewals. If waivers are not submitted by December 31, 2016 their wages will be included in payroll to be used in the premium calculation.
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