IIABCal Works to Revise Independent Contractor Legislation

This week IBA West dropped its opposition to a bill regarding reporting requirements for independent contractors. 

As initially introduced, SB 459 (Corbett) would have required all employers in California to provide to independent contractors a form developed by the Employment Development Department (EDD) regarding the factors affecting and significance of being classified an independent contractor.  In addition, this measure would require employers to maintain for two years a record of all independent contractors hired by the employer.

IBA West dropped its opposition in response to changes proposed by the bill's author, Senate Majority Leader Ellen M. Corbett (D-San Leandro). IBA West and others had been working with Corbett and her staff for several months explaining how the bill would impose onerous new administrative burdens and unnecessary requirements on both insurance companies and insurance agents and brokers given the settled nature of independent contractors in the industry, explained John Norwood, IBA West's legislative advocate. Norwood helped to organize and coordinate the efforts of a broad industry coalition which included insurance companies and agents and brokers. 

The insurance industry is a unique, but established industry, explained Norwood. Federal courts and the Internal Revenue System have upheld the classification of insurance agents as independent contractors.  They own, operate and manage their businesses, receive 1099 forms from their contracted insurers and are individually licensed by the California Department of Insurance.  Each insurance agency maintains a contract with the insurers for which they write coverage. 

Insurance companies, in addition to providing a form to each of their agents and brokers, would also have been required to provide forms to all other independent contractors used to process claims which could include, but are not limited to, tow-truck drivers, physicians, chiropractors, attorneys, and many more.  

Last week after months of discussions, Corbett, who wanted to reduce costs and move the bill out of committee, agreed to remove the burdensome requirements.  With these amendments, IBA West agreed to remove its opposition. 

While better than it was, the bill is still unpoplular with business groups including the Chamber of Commerce and Small Business California. 

"There are still a number of concerns about this bill in the broader employer community," said Norwood, "but the immediate issues affecting the insurance industry have been addressed. 

IBA West is the only California Insurance trade association representing property and casualty insurance agents and brokers which maintains full time legislative and regulatory representation in the State Capitol and before the state’s regulatory agency such as CDI.