How California Came to Make a Mess of a Law

Posted: Mar 19, 2017 12:01 AM
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I recently wrote a column about a law that California put into force on January 1, 2017, that requires certain small business owners to acquire workers’ compensation insurance that most or all will never use. This is an added cost for the small businesses that will only inure to insurance companies and in the end drive up costs to consumers. After publication of this column, I learned more about the passing of the law which was fascinating to me and hopefully will be fascinating to you.

The bill, AB 2883, sailed through the legislature with virtually no discussions and near unanimous consent. Apparently, after the bill was signed into law, a firestorm of concern regarding the effects of the bill were expressed. As was told to me by Mark Rakich, who works for the legislative committee that generated this bill, this was “A perfect storm of competent and well-tuned organizations messing up.” Mr. Rakich had read my column and initially was less than friendly, but after we talked out the matter he was very instructive. In fact, SB189 is now being worked through the current session of the California Senate to make corrections to last year’s bill. The problem is we do not know the final wording of that bill. What we do know is a law that possibly should have never been passed will be hard to alter because existing constituencies will want to maintain what they have established.

This bill was generated by the Association of California Insurance Companies (ACIC). I spoke with Mark Sektnan, President of ACIC. He stated that the genesis of the bill was that some of his members complained about the fact that some of the companies they insured had claimed low-level employees were exempt from workers’ comp insurance by naming them as officers or directors of the company. When asked if he had developed a study to determine how frequently these improper actions occur, he said he had checked with other members of his association, but only had anecdotal evidence. That was enough to generate a bill. It was modeled after laws in place in some other states, but set more restrictive requirements in California.

The bill was sponsored by the committee, not a specific member of the Assembly, because it was generated by a third party. It was sent out to the usual interested parties for review and was published for others to review. The response was a resounding thud. I told the people behind the bill next time call me, because it took me about half a minute to realize the negative impact of this bill. Since no one crabbed about the bill it sailed on.

The most likely suspects to complain about the bill were professional groups such as the California Dental Association or the California Medical Association. The California Chamber of Commerce did not blink when reviewing the bill. The group I spoke to was the California arm of the National Federation of Independent Business (NFIB). Ken Devore, State Legislative Director, was very helpful in describing how this was missed by his group. While not excusing the overlooking of this bill, he says he farms out anything on Workers’ Comp to a consulting firm he has because he just does not have enough understanding of the subject. He also stated he can be tracking 500 bills at one time and it is challenging to keep up on all of them. Many times they get altered in committee and become significantly different from their original form.

Let us digress for a moment and focus on two issues. First, the ridiculous number of bills that are offered in the California Legislature. It is a fact, as stated by the NFIB, that there are approximately 5,000 bills introduced in every two-year session of the legislature. That not being enough, the Assembly voted themselves the right to introduce an additional 10 bills per member which adds 800 potential bills to the existing total. Last year Governor Brown signed nearly 1,000 bills into law. How can anyone keep track of all these bills and/or how have they changed the lives of residents? This is why so many people break laws because very few people know the rules.

The second point is that I am going to offer a full-throated defense of a dirty word in America today – lobbyists. You can say we should not need lobbyists, but that would leave us blind regarding most actions in our legislatures or the U.S. Congress. The only way people can protect their interests in these matters is to hire someone who is knowledgeable to follow these bills and speak for us. We cannot be following each one of these bills whether we run a business, union, or are just an average citizen involved in an issue important to us -- whether it be workers’ comp laws or protecting animals. The only way to get rid of lobbyists is to massively shrink the government at all levels and that is unfortunately not going to happen. Eliminating lobbyists is a fool’s errand.

There was apparently another Workers’ Comp bill (SB 1160) last session which was the focus of the people who follow Workers’ Comp in California. This had to do directly with controlling the costs, which as stated in my last column are the highest in the nation. It is obvious why many want to circumvent paying the required costs. For many businesses Workers’ Comp costs are staggering.

We have to hope that a new bill will lessen the harsh effects of AB2883. As long as we have 2,500 or more bills being authored a year and 1,000 signed into law, then we will have a mass of either misunderstood consequences or unintended ill consequences -- both are a good argument for a part-time legislature.