San Diego Democratic Assemblywoman Lorena Gonzalez Fletcher proposes Assembly Bill 206 as an end to the “day laborer exemption” in the labor code. This is apparently sponsored by the California Applicants' Attorneys Association. 

Assemblywoman Lorena Gonzalez Fletcher

The recent CAAA press release regarding AB 206 misses the entire point of Labor Code Section 3352(h). I suspect this was deliberate in order to sell the bill as protecting day laborers, when it potentially hurts them, and will certainly have extremely serious consequences for anyone in California who owns or rents a home or apartment. 

Under current law, anyone performing services for another in exchange for compensation is presumed to be an employee. There are several exemptions, most of which are contained in Section 3352, for individuals doing charitable work, volunteers, etc. 

Section 3352(h) is an exemption to Section 3352(d), which provides that an "employee" is any person who does work for the owner or occupant of a residence, so long as the work is incidental to the use or maintenance of the residence, of personal service to the occupant and is not in the course of the regular business of the occupant. 

Section 3352(h) excludes individuals who perform services who have worked for less than 52 hours in the last 90 days for that residence, or who earned less than $100 for their work at the residence in the last 90 days, from the definition of "employee." It is often mistakenly said that Section 3352(h) requires both less than 52 hours and less than $100 earned. This is not the case. Failing to meet either is a bar to employment.

The effect of Section 3352(h) is that if you didn’t work at least 52 hours in the last 90 days as a residential worker, then you are not considered an “employee” for the purposes of workers' comp. Instead, you would be able to file civil suit for negligence, or any other tort that may occur while on the residential property. 

Even if you do not meet the 52-hour or $100 threshold, there are situations where the “residential” exemption doesn’t apply. For example, the “residence” is not really a residence if it is unoccupied. The residential employee exemption also does not apply if the work being done is in the course of the business or trade of the homeowner. This would apply to a professional who works from home and has a secretary or assistant working for him, or to a person who owns and manages multiple rental properties as their primary source of income and employs a handyman, gardener, etc. 

AB 206 and the CAAA talking points completely mischaracterize Section 33352(h) as a “day laborer” exemption, apparently as an attempt to cast AB 206 as a law that will only affect the sort of temporary construction workers that one hires out of the parking lot of Home Depot.

However, the actual impact of Section 3352(h) would be far greater than merely allowing a day laborer on a home improvement project to collect workers' comp benefits. In reality, Section 3352(h) was intended as a protection for homeowners, whether they own a home and land, or whether they are renting an apartment or condo, against the burdens and costs of maintaining workers' compensation insurance. 

Section 3352(h) insulates individuals from the workers' comp system by ensuring that they can bring people into their home to help with chores, maintain the home, and provide short-term child care without having to carry a standard workers' compensation insurance policy as required of all “employers” in this state. 

Without that insulation, every time you give the neighbor’s kid $20 to mow the lawn or take in the trash, every time you pay a baby-sitter $40 so you can take a night out, or any time you have a handyman come and do some minor task around the home, you had better be doing the math on how much you’ve paid them in the last three months, or you might have just hired an employee, with all the responsibilities and legal obligations that entails. 

Without the 52-hour requirement, as proposed in AB 206, Section 3352(h) becomes meaningless. 

In this day and age, even the neighbor’s kid won’t take out the trash for less than $20 a week. In 90 days there are 12.875 weeks, so that means you’ve paid $257.50 for this “service” over the last three months. That means that little Timmy from next door is now your employee.  You also better hope he’s over 18, otherwise you’ve violated several sections of the Labor Code.  

Use a baby-sitter? Well, if you pay $10 an hour (good luck finding someone that cheap) for four hours to take a night out every other week, then over that 90-day period you’ve exceeded $100. Under AB 206, you’ve now hired an employee — an employee who worked for only about 24 hours over a three-month period. 

And of course, yes, if you hire a day laborer to come paint your fence or some other minor task and pay him more than $100 for a few hours of work, you’ve hired an employee.

Section 3352(h) was specifically put in place to protect people from this sort of thing. And it doesn’t just protect the resident. Who’s going to pay the neighbor’s kid to take out the trash or walk the dog if they have to buy an expensive comp policy, report the number of “employees” and payroll information, comply with notice requirements, and go through all the other hoops that employers have to go through in California?

Professional handymen rely on this exemption together with the $500 dollar work value exemption in the Business & Professions Code that allows them to do work without a contractor’s license. And, like it or not, day laborers rely on piecemeal work at homes around the state to feed themselves and their families. This law will starve the people it purports to protect.

What’s more devastating is that this amendment does not affect the Insurance Code. Since the 1970’s all homeowner’s policies have been required to include workers' compensation insurance provisions for employees of the residence. Since this is in response to Labor Code Section 3351(d), the language in the policies mirrors that of Section 3352(h), in that the policy covers those who have worked at least 52 hours and earned $100 in the last 90 days. AB 206 does not address this. There is nothing requiring insurance companies to change the language in their policies right now. 

Although Insurance Code Section 11590 says the policy will cover employees under Labor Code Section 3351(d), the policies themselves are all written as excluding individuals who work fewer than 52 hours or earn less than $100. 

The Insurance Code is not explicit as to whether the exclusions under Labor Code Section 3352(h) apply, and since AB 206 does not amend the Insurance Code, there will be great uncertainty about whether existing homeowner’s policies cover “employees” who worked fewer than 52 hours.

Further, there is a question as to whether a policy’s coverage can be extended by an amendment to the Labor Code, or whether the policy needs to be re-written and re-issued. At the very least, this massive extension of exposure by legislative fiat will result in already expensive homeowner’s policies increasing in cost.

So if AB 206 passed, there could be millions upon millions of homeowners and renters in California who would suddenly become illegally uninsured employers. Little Timmy from next door is suddenly your employee, but excluded from the work comp provision in your homeowner’s policy because he didn’t work enough hours in the last 90 days. 

As an illegally uninsured employer, you now are subject to criminal charges. A “stop order” may issue by the Department of Labor Standards Enforcement, and you can be assessed a fine of $1,000 per “employee” at the time the order issues, plus a penalty of $1,500 per “employee” or twice the cost of a year’s worth of premiums for insurance. 

And that’s just if you get reported. If an actual injury occurs, you will be assessed a penalty of $10,000 per employee at the time of the injury if the injury is found compensable, or $2,000 per employee even if the injury is not compensable.

Additionally, as an uninsured employer, the applicant can sue you in civil court and file a comp claim simultaneously. Furthermore, as an illegally uninsured employer there is a presumption of negligence against you in civil court actions. So, the applicant can collect work comp benefits, and get damages for emotional distress, loss of consortium or any other claim their attorney can dream up in tort.

And then there is the UEBTF, the Uninsured Employers Benefits Trust Fund, a state agency that pays for the comp claims of employees of illegally uninsured employers. If the UEBTF pays benefits on the claim, watch out. They can take possession of any personal property you own to satisfy their lien in the comp case. You car, your house, your business assets. Anything. And their lien cannot be discharged by bankruptcy. With even simple claims in comp costing tens or even hundreds of thousands of dollars, this is a huge risk for household residents. 

The system we have now works. Yes, some people who may eventually have worked enough hours to qualify as employees will get excluded from coverage. However, if the homeowner was actually at fault in any way, the injured party will be able to recover in a civil suit, which the homeowner’s policy will cover.

Meanwhile, for the vast majority of cases where there was obviously never any intent to create an employment relationship, Section 3352(h) will allow the resident to obtain services necessary to maintain their home, or just take a night off once in a while, without paying thousands of dollars a year for a workers' comp policy. 

In short:

Section 3352(h) is not a “day laborer exemption,” it is a law that protects every resident who rents a home or apartment against California’s burdensome work comp laws when they bring someone in to do short-term or one-time work or services for them.  

• There are already numerous exceptions to Section 3352(h) to ensure that people who actually are “employees” get covered. Section 3352(h) itself ensures that if you are doing regular work at a residence, you become an employee.
• Section 3352(h) is not new law — it has been the law for decades and remained unquestioned because it offers valuable protection for all Californians who rent or own a home, condo or apartment. 
• The proposed law will not change homeowner’s insurance policies — those are controlled by the Insurance Code. This means that tens of millions of Californians may suddenly become illegally uninsured “employers” overnight. And since the employment is not covered under the homeowner’s insurance policy, they will be subject to absolutely devastating financial consequences if the baby-sitter trips on her shoelaces or the handyman breaks his hand with his own hammer.
• This amendment to the Labor Code will bring about thousands upon thousands of dollars in new claims against homeowner’s policies as plaintiffs who would never have a case in civil court because they were at fault in their own injury can now file in the “no fault” workers' comp system. Rest assured, these costs will be passed on to every Californian with a personal liability homeowner's or renter’s insurance policy. 

Maybe the members of CAAA might want to consider these points, and ask themselves whether they or anyone they care about has ever hired anyone to do a simple task around the house, or a day’s work. I’d think they might want to consider what would happen to them should a no-fault injury occur and they find themselves as an illegally uninsured employer facing tens of thousands of dollars in fines and penalties on top of the full cost of a litigated workers' compensation claim. This is a far bigger issue than the 15% they can make off of a few more claims becoming compensable if this passes. 

Assemblywoman Gonzalez Fletcher might also want to consider the fact that even the most mild consequence of this amendment to the Labor Code will result in increased costs of already expensive insurance for the vast majority of her constituents, not to mention the additional burden on an already strained workers' compensation system.   

James Britt is a certified specialist in workers' compensation, with experience representing both applicants and defendants. He is a senior associate with the defense firm of Hallett, Emerick, Wells, and Sareen in Calabasas.