American Labor Alliance and CompOne USA were ordered on Wednesday to stop selling workers’ comp policies in California because they are not properly licensed, according to a ruling by Chief Administrative Law Judge Kristin Rosi.

“Companies not properly licensed to transact insurance in California place policyholders at risk because the companies have not met the scrutiny required under state law,” California Insurance Commissioner Dave Jones said in a statement. “These unlicensed entities dangerously undermine consumer protections established by California law.”

Both firms had a cease and desist order issued against them in October 2016, alleging they were selling and issuing workers’ comp insurance without proper authority. They challenged the order, but Rosi upheld it this week following an evidentiary hearing.

American Labor Alliance and CompOne USA are subsidiaries of Agricultural Contracting Services Association, which is a Nevada not-for-profit corporation headquartered in Clovis, Calif., according to documents from the Department of Insurance. It characterizes itself as a “union labor organization” operating in California, New York and Georgia. Neither Agricultural Contracting Services Association nor any of its subsidiaries is licensed by the California Department of Insurance.

The American Labor Alliance had contracted with fewer than 100 employers and had a small membership roll before 2016, but its membership surged after it introduced its workers’ comp benefit, according to documents from the department. It had more than 400 employers with 30,000 members as of February 2017. “Two-thirds of those employees are seasonal agricultural workers employed by roughly 50 farm labor contractors,” according to documents from the department. “For example, farm labor contractors Russell Contracting LLC, Supreme Valley Agriculture and West Coast Staffing each employ over 1,000 agricultural workers.”

The ruling found that the American Labor Alliance was not a certified labor organization engaged in lawful collective bargaining, but that it was a MEWA, or multiple employer welfare arrangement, subject to state regulation.

“Employers who purchased insurance from American Labor Alliance or CompOne USA are likely at great financial risk,” Jones said in a statement. “Companies not properly licensed to transact insurance in California place policyholders at risk because the companies have not met the scrutiny required under state law. These unlicensed entities dangerously undermine consumer protections established by California law.”

Workers’ Comp Executive reported the American Labor Alliance is planning to appeal the ruling.