Effective January 1, 2017, new legislation expanded California workers’ compensation coverage by requiring coverage for certain officers, directors, and owners of companies unless they affirmatively “opt out” and waive coverage. AB 2883, signed into law by Gov. Jerry Brown on August 26, 2016, reverses the prior rule by which those high-level individuals had to “opt in” to get coverage.
In general, California employers are required to provide employees with workers’ compensation insurance coverage for work-related and industrial injuries and illnesses. Up until now, the term “employee” has included paid directors and corporate officers, but has excluded directors and corporate officers who are the sole shareholders and has excluded working members of a partnership or limited liability company (LLC).
According to AB 2883, all officers and board of director members who work for a corporation for pay will be covered under workers compensation unless:
- The individual owns at least 15% of the issued and outstanding stock of the corporation
- The individual executes a sworn waiver of rights under the Labor Code
Working members of a partnership or LLC will be covered employees unless:
- They are a general partner of a partnership or a managing member of an LLC
- They sign a waiver
By opting out, any working owner waives right to the following three main benefits:
- Potential lifetime medical coverage for the industrial injury
- Rights to permanent disability
- Temporary disability to cover any wage loss