Worker Comp in CA & AZ Application

I get excited knowing the questions and answers in this column can improve life for contractors. All most contractor’s want in competitive bidding is a level playing field. Unfortunately, some place bids knowing they are exposing their workers to danger on the job and that’s unfair to all…

Contractor Update: Many months ago, I responded to a caller who was having difficulties with the AZ Contractors License Application. After assisting him with his problem, I corresponded with the Registrar of Contractors office regarding these issues. After a few months, a representative who was sympathetic to the issues raised contacted me.

I am happy to report that the newly released Application For Contractors License in AZ has been amended thereby clarifying several confusing questions. The ultimate result for contractors: fewer delays with processing!

Q: I am unfamiliar with the procedure but I have a question. How do I choose between an RMO and RME? Once I decide, what’s the fastest way to make it official? Can we operate until everything is completed? Thanks for the quick response.

A: The RME (Responsible Managing Employee) and RMO (Responsible Managing Officer) are designations for the qualifying individual on a corporation contractor’s license. You’ll need to decide if you want the qualifier to be an officer (RMO) of your corporation, which in turn will dictate the designation. There should be no time difference applying with either one. If you’re applying for a sole owner or partnership license “RMO” by definition is not an option.

Q: Some of my competitors have employees but have no Worker’s Comp. Obviously if I have this insurance and they don’t, I’ll lose out on some jobs. In fact, I have already lost two jobs to contractors who bid lower. What could happen if I do not carry this insurance? I only have two employees.

A: All contractors that have one or more employees must file proof of Worker’s Compensation coverage with the CSLB (Roofing contractors must file even when they have NO employees). In a recent press release, the CSLB urged its 315,000 licensees to “make sure all employees are covered by the appropriate amount of Worker’s Compensation insurance.”

As you have observed, some employers file Exemption forms with the CSLB when in fact they have employees. Other contractors may under report payroll to cut down on insurance costs. According to CSLB Register Steve Sands, “We understand why businesses try to cut expenses, but cheating on Worker’s Compensation insurance is illegal.” It’s also a real danger to anyone who works for you should they be hurt on the job.

The State knows that contractors who break the law have an unfair business advantage over those who follow the rules. Therefore, in the coming months, the CSLB and other state government agencies will be concentrating some of their enforcement efforts on companies that either don’t carry insurance or misrepresent the number of employees they have.

If you decide to work without the proper insurance you may get caught up in one of the State’s sting or sweep operations. The penalty for a first offence can be up to one year in jail and a $10,000 fine. Further, according to the CSLB, a stop order can be issued on projects and fines of $1000 per employee can be levied on your company. Then there are the legal and medical costs for anyone who does get hurt without coverage. Better pay a little now and be legal, than get caught and pay a lot more.