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AB-233 Insurance: licensees.(2019-2020)

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Date Published: 04/12/2019 04:00 AM
AB233:v98#DOCUMENT

Amended  IN  Assembly  April 11, 2019

CALIFORNIA LEGISLATURE— 2019–2020 REGULAR SESSION

Assembly Bill
No. 233


Introduced by Assembly Members Cooley and Daly

January 17, 2019


An act to add Section 49 to amend Section 1725 of the Insurance Code, relating to insurance.


LEGISLATIVE COUNSEL'S DIGEST


AB 233, as amended, Cooley. Insurance: independent contractors. licensees.
Existing law generally regulates the business of insurance in the state, including the licensing of persons who transact insurance. Existing law requires the license of a residential property broker-agent, casualty broker-agent, personal lines broker-agent, or limited lines automobile insurance agent to be prominently displayed in the holder’s office. Existing law requires the Insurance Commissioner to impose a $200 fine for the first violation of that requirement if it is not corrected within 45 days, and authorizes the commissioner to impose a $400 fine if another violation is committed within 3 years of the first violation.
This bill would require a broker-agent, agent, or licensed organization that maintains multiple offices to prominently display a copy of its license in each office. The bill would require a broker-agent, agent, or licensed organization that sells insurance on an internet website to display a link to a copy of its license on its home page.

Existing law authorizes the Department of Insurance to issue a license to a person to transact insurance in various capacities, including as an insurance agent or broker, a surplus line broker, or a life and disability insurance analyst. Existing law generally regulates written agency or brokerage contracts between insurers and broker-agents, including the terms upon which an agency or brokerage contract may be terminated and the commission payable to a broker-agent.

Existing case law creates a presumption that a worker who performs services for a hirer is an employee. Existing case law requires a 3-part test to establish that a worker is an independent contractor, including that the worker is free from the control and direction of the hirer in performing the work.

This bill would clarify the application of the case law described above to persons licensed by the department to transact insurance in specified capacities by providing that those persons are not employees when they have entered into a written agreement with an insurer or organizational licensee that includes specified provisions, including that the worker is classified as an independent contractor, that each party has the right to terminate the agreement upon notice to the other party, and that the worker is responsible for the payment of necessary expenditures and applicable taxes. The bill would allow the parties to the agreement to classify the worker as either an employee or an independent contractor, but would prohibit a worker from being classified as an independent contractor unless the agreement contains the provisions described above.

Vote: MAJORITY   Appropriation: NO   Fiscal Committee: NOYES   Local Program: NO  

The people of the State of California do enact as follows:


SECTION 1.

 Section 1725 of the Insurance Code is amended to read:

1725.
 Every license to act as a resident residential property broker-agent, casualty broker-agent, personal lines broker-agent, and limited lines automobile insurance agent shall be prominently displayed by the holder thereof in his or her the holder’s office in a manner whereby anyone may readily inspect it and ascertain both its currency and the capacity in which its holder is licensed to act. If a broker-agent, agent, or licensed organization maintains multiple offices, it shall prominently display a copy of its license in each office. If a broker-agent, agent, or licensed organization sells insurance on an internet website, it shall prominently display a link on its home page to a copy of its license so a consumer may readily inspect it and ascertain both its currency and the capacity in which its holder is licensed to act.

SECTION 1.Section 49 is added to the Insurance Code, to read:
49.

(a)The term “employee,” for purposes of California wage orders of the Industrial Welfare Commission, the Labor Code, the Unemployment Insurance Code, the Division of Workers’ Compensation, or any other purpose related to the characterization of employees and independent contractors under statute or common law, shall not include a person or organization who is licensed by the department pursuant to Chapter 5 (commencing with Section 1621), Chapter 6 (commencing with Section 1760), and Chapter 8 (commencing with Section 1831) of Part 2 of Division 1, and who has entered into a written agreement with an insurer or organizational licensee that includes all of the following provisions:

(1)The parties have voluntarily entered into the agreement.

(2)The worker is classified as an independent contractor.

(3)Each party has the right to terminate the contract upon notice to the other party.

(4)The worker may work outside the hirer’s physical place of business.

(5)The worker is responsible for the payment of necessary expenditures or losses incurred as a direct result of discharging the worker’s responsibilities under the agreement.

(6)The consideration provided by the hirer to the worker is in the form of commissions, fees, or incentives, or all of these.

(7)The worker is responsible for the payment of all applicable taxes on compensation earned.

(b)The parties to the agreement may characterize the worker as an employee or an independent contractor, at the discretion of the parties, except that a worker may not be classified as an independent contractor unless the conditions in subdivision (a) are met.