Contractors: workers’ compensation insurance.

Senator Grayson’s measure reorients how California’s Contractors State License Board oversees workers’ compensation exemptions for contractors and entities with no employees, centering on a formal verification process and tying license renewal to current coverage while introducing new civil penalties and expanded enforcement reporting.

A core component requires the board to establish by 2027 an audit- or evidence-based process to verify that applicants or licensees without employees are eligible for exemption from the workers’ compensation requirement, with the proposed verification method and supporting procedures to be reported to the Legislature by that date. The bill also expands annual reporting to the Legislature, requiring detailed metrics on complaints, investigations, enforcement outcomes, and specific data related to exemptions violations, including those tied to workers’ compensation provisions. The reporting obligation includes a sunset date of January 1, 2030, unless extended by future statute.

Civil penalties under the measure are structured to alter the current framework in two ways. First, a revised framework contemplates explicit minimum penalties and inflation adjustments over time, with separate ranges for general violations and for violations involving certain covered sections. Second, the bill imposes minimum penalties for exemptions violations tied to workers’ compensation coverage: at least ten thousand dollars per violation for sole-owner licensees employing workers without coverage, and at least twenty thousand dollars per violation for partnerships, corporations, LLCs, or tribal licensees, with additional penalties possible for subsequent violations. In addition, a qualifier responsible for compliance could face misdemeanor liability for permitting violations, and license renewal or reinstatement would be withheld until a current certificate of workers’ compensation insurance or a self-insurance certification is on file in the licensee’s business name.

The measure also tightens eligibility verification and licensing discipline in other ways. It adds new requirements that the board not renew or reinstate a license found to be in violation of exemption provisions until proper coverage documentation is on file, and it broadens enforcement to include more granular tracking of enforcement actions, citations, referrals to prosecutors or the Attorney General, and cost recovery. The package contemplates a cross-reference with a companion reform, creating sequencing conditions that determine which penalty and verification provisions are operative based on how the companion measure is enacted, with certain provisions becoming operative only if both bills are enacted and implemented in a specified order. Timelines anchor key steps: the 2026 date for the inflation-adjusted penalty framework’s operative start (where applicable), the 2027 deadline for establishing and reporting the verification process, and the 2030 sunset for the reporting requirement unless extended.