Operating a business in California? If so, you might have already asked who is required to have workers’ compensation insurance in California. It’s a hot topic and one that you should know the answer to if you want to avoid severe consequences.
California Workers’ Compensation Requirements For Employers
First off, California has some of the most employee-focused labor laws in the country, and that includes strict requirements for workers’ compensation insurance. Simply put, every employer with at least one employee is required by law to carry workers’ compensation insurance in California – no exceptions. This applies to both full-time and part-time employees, and not carrying coverage can result in serious penalties.
The reason for this law is pretty simple. Workers’ compensation insurance helps protect employees by providing coverage for any injury or illness sustained while on the job. It also protects business owners from any potential lawsuits and financial liability.
Who Qualifies as an “Employee” in California?
California has a fairly broad definition of who legally qualifies as an employee. The role isn’t limited to people on payroll; it can also include temp workers, minors, and, in some cases, even volunteers. The state uses specific criteria (like the ABC Test for independent contractors) to determine whether or not a worker should be classified as an employee. Misclassification can result in heavy fines and even legal issues.
One of the most common mistakes employers make is assuming that hiring someone as an independent contractor means they’re exempt from workers’ compensation requirements. However, if the state finds that a person functions like an employee, you could still be on the hook for coverage. When in doubt, consult a professional insurance broker like SafeCal, who can help you determine your potential obligations.
Are Sole Proprietors and Partnerships Required to Carry Coverage?
Here’s where things can get a little trickier. Sole proprietors who do not employ anyone else are typically not required to carry workers’ compensation insurance. But if they have even a single employee, then they need to obtain coverage. Partnerships and LLCs follow a similar rule. The business owners themselves are not required to be covered under the law, but any employees they hire must be.
What About Corporate Officers and Executive Employees?
Yes, even corporate officers and executive employees count under California law. If your corporation employs any individual other than the officers or directors (unless they’re the sole shareholders), you are required to provide workers’ compensation insurance. And yes, that includes family members working for your business, even if they’re not being paid.
The only exception is when corporate officers own 100% of the business and elect to exclude themselves. But again, this must be done formally and with full documentation submitted to your insurer and the state. To avoid confusion and ensure you’re protected, it’s always best to work through a licensed broker such as SafeCal, which specializes in California labor law compliance.
What Are the Penalties for Not Carrying Workers’ Compensation?
The cost of non-compliance is not to be ignored! If you’re caught operating without workers’ comp, the California Division of Workers’ Compensation can issue stop-work orders and shut down your business on the spot. On top of that, you could face:
- Fines of up to $100,000
- Criminal charges are classified as a misdemeanor
- Personal liability for injured workers’ medical costs and lost wages
Industry-Specific Considerations in California
California’s rules are the same across industries, but some fields are subject to far more scrutiny and oversight. Construction, agriculture, hospitality, and manufacturing are all high-risk sectors where workplace injuries are more common. It also means these areas are where regulators pay closer attention. If you’re in one of these industries, your insurance carrier may require additional safety protocols, frequent audits, and more detailed documentation.
How to Get Workers’ Compensation Insurance in California
Getting insured is easier than it sounds. You can purchase workers’ compensation through a private insurance broker or directly from the State Compensation Insurance Fund (State Fund). However, working with a broker like SafeCal gives you access to more competitive quotes, personalized service, and expert guidance in navigating California’s regulations.
A broker can help you:
- Compare quotes from multiple carriers
- Understand the classification codes that determine your premiums
- Make sure your payroll reporting is accurate
- Stay ahead of annual audits or regulatory changes.
Ready to Protect Your Business and Employees?
Don’t wait for an accident or audit to find out you’re out of compliance. Contact SafeCal today to get a custom workers’ compensation policy tailored to your business needs.