Workers' Compensation Insurance In California

Workers’ compensation insurance covers medical expenses and lost wages for employees who get injured or become ill due to their job. In California, all employers are legally required to carry workers’ comp insurance, regardless of the number of employees or whether they’re full-time or part-time.

Who Needs Workers’ Compensation Insurance In California?

In California, workers’ compensation insurance is required by law for all employers, with no exceptions based on the number of employees. Even if a business has only one part-time worker, it must carry a valid workers’ comp policy.

This legal obligation comes from California Labor Code Section 3700, which outlines that every employer must either purchase a policy from a licensed insurance company or become self-insured through state approval.

Requirements do differ slightly depending on the business structure and industry:

• Sole Proprietors: Generally, sole proprietors without employees are not required to carry workers’ comp. However, roofing contractors are a notable exception—they must maintain coverage whether they have employees or not.
• Corporations: Executive officers and directors are usually considered employees. However, if all directors are also the sole shareholders, they may choose to exclude themselves from coverage.
• LLCs: Members and managers of LLCs may also be eligible for exclusion from workers’ comp coverage, depending on their role and ownership status.
• Independent Contractors: California assumes workers are employees unless the employer can prove otherwise. If a business misclassifies a worker as an independent contractor to avoid buying insurance, it risks significant penalties.

In short, nearly all businesses in California—regardless of size or industry—must have workers’ compensation insurance unless they fall under a narrow set of exclusions.

Do You Need Workers’ Compensation If You Are Self-Employed?

If you’re self-employed in California and don’t have any employees, you’re generally not required by law to carry workers’ compensation insurance. The state only mandates coverage for businesses with at least one employee. However, there are some important exceptions and considerations.

Requirements For Self-Employed Individuals

• Sole Proprietors: Not legally required to carry coverage unless they hire employees.
• Roofing Contractors: Even self-employed roofers must carry workers’ comp, due to the high-risk nature of the work.
• Contractor Licensing: Some industries, such as construction, may require proof of workers’ comp to obtain or renew a contractor’s license, even for self-employed individuals.

Is It Useful For Self-Employed Individuals?

Yes, in some cases it can be. Even though it’s not legally required, self-employed workers might still benefit from buying a policy:

• Personal Protection: If you’re injured on the job, health insurance may not cover everything, especially lost wages. Workers’ comp can help fill that gap.
• Client Contracts: Some clients may require independent contractors to carry workers’ comp as part of doing business with them.
• Legal Safeguards: Having a policy in place can protect your business from liability claims, especially if you bring on subcontractors or temporary workers.

While self-employed individuals in California usually aren’t obligated to buy workers’ comp insurance, having it can provide valuable protection, both physically and financially.

Is Workers’ Comp Mandatory In California For Part-Time Employees?

Yes, workers’ compensation insurance is mandatory in California for part-time employees. The law does not distinguish between full-time and part-time workers—if you employ someone, even for just a few hours a week, you are legally required to provide workers’ comp coverage.

Requirements For Part-Time Employees

All part-time employees are covered under California’s workers’ compensation laws. This includes seasonal and temporary workers as well. There is no minimum number of hours or days worked to qualify. As long as the person is classified as an employee, not an independent contractor, they must be covered.

How Benefits Are Calculated

Part-time employees are entitled to the same types of benefits as full-time workers, including:

• Medical treatment for work-related injuries or illnesses
• Temporary disability benefits if they’re unable to work
• Permanent disability benefits for lasting impairment
• Supplemental job displacement benefits if they can’t return to their job
• Death benefits for surviving dependents in fatal cases

The only difference is in the amount of disability payments, which are based on the worker’s average weekly earnings. Since part-time employees earn less, their disability payments will typically be lower.

Common Misclassification Issues

Some employers misclassify part-time workers as independent contractors to avoid paying for coverage. However, California uses strict criteria to determine employment status, and most workers, even part-time ones, are legally considered employees. Misclassifying a worker can lead to serious legal and financial penalties.

Who Is Exempt From Needing Workers’ Compensation Insurance In California?

While California has some of the strictest workers’ compensation laws in the country, there are a few limited exemptions where workers’ comp insurance may not be required.

Sole Proprietors Without Employees

If you’re a sole proprietor with no employees, you are not legally required to carry workers’ compensation insurance. However, if you hire even one employee, part-time or full-time, you must get coverage. One key exception to this exemption is roofing contractors, who are required to carry workers’ comp insurance even if they have no employees.

Executive Officers And Directors Of Corporations

Corporate officers and directors who own all of the company’s stock may choose to exclude themselves from coverage. This election must be properly documented and filed with the insurer.

Members Of An LLC

In certain cases, managing members of an LLC can opt out of coverage if they meet specific criteria. The option to exclude depends on the ownership structure and whether the member performs day-to-day work activities.

Independent Contractors

True independent contractors are not considered employees and therefore are not required to be covered by workers’ comp. However, California uses strict guidelines to define who qualifies as an independent contractor, and many people classified that way are actually employees under the law. Misclassification can result in severe penalties.

Family Members And Household Workers

Some family members working for a business, such as a spouse or child, may be exempt in specific scenarios, particularly in sole proprietorships. Similarly, household workers (like a nanny or gardener) who earn less than a certain threshold per quarter may not need to be covered, though this depends on the number of hours worked and wages paid.

Volunteers And Certain Nonprofits

Volunteers who are not compensated are generally not covered, although some nonprofit organizations voluntarily include them in their workers’ comp policy. Coverage rules can vary depending on the organization’s structure and the nature of the volunteer work.

Any business considering an exemption should be careful to fully understand the legal criteria, and when in doubt, err on the side of providing coverage to avoid penalties.

What Does Workers’ Compensation Cover In California?

Workers’ compensation insurance in California provides financial and medical benefits to employees who suffer job-related injuries or illnesses. It’s a no-fault system, meaning the employee doesn’t have to prove the employer was negligent to receive benefits. Here’s what the coverage typically includes:

1. Medical Care

Covers all necessary medical treatment related to the work injury or illness. This includes doctor visits, surgery, hospital stays, prescription medications, physical therapy, and medical equipment. The care must be provided through a medical provider network (MPN) approved by the employer’s insurance carrier.

2. Temporary Disability Benefits

If an injured employee is unable to work while recovering, workers’ comp pays temporary disability benefits. These are wage-replacement payments—typically two-thirds of the employee’s average weekly earnings—up to a state-mandated maximum. Benefits continue until the employee returns to work or reaches maximum medical improvement.

3. Permanent Disability Benefits

If the worker doesn’t fully recover and suffers a lasting impairment, they may be eligible for permanent disability benefits. The amount depends on the severity of the disability, the worker’s age, occupation, and the date of injury.

4. Supplemental Job Displacement Benefits

If an injured worker can’t return to their previous job and the employer doesn’t offer modified or alternative work, the worker may receive a voucher to help pay for retraining or education. This benefit is called a Supplemental Job Displacement Benefit (SJDB) and is capped at a certain amount.

5. Death Benefits

If an employee dies from a work-related injury or illness, their dependents may be entitled to death benefits. This includes burial expenses and ongoing financial support for eligible family members, such as a spouse or children.

6. Mileage Reimbursement

Workers’ comp also covers travel expenses to and from medical appointments. Employees can be reimbursed for mileage at the state-approved rate.

Workers’ compensation in California ensures that injured workers receive care and compensation while shielding employers from most personal injury lawsuits.

What Does Workers’ Compensation Not Cover In California?

Workers’ compensation in California does not cover every situation. Here are some common exclusions:

• Injuries outside of work: If the injury or illness didn’t occur in the course of employment, it’s not covered.
• Self-inflicted injuries: Injuries that are intentionally caused by the employee are excluded.
• Injuries from horseplay or intoxication: If the worker was intoxicated or engaging in roughhousing or misconduct, the claim may be denied.
• Commute-related accidents: Injuries sustained while commuting to or from work are generally not covered, unless the employee was performing a work duty.
• Independent contractors: True independent contractors are not eligible for workers’ comp benefits.
• Emotional stress without physical injury: Claims based solely on mental stress, without evidence of a physical injury or verified psychiatric diagnosis, are difficult to prove and often denied.

Essentially, workers’ comp in California doesn’t apply when the injury isn’t job-related, is caused by misconduct, or involves people not classified as employees.

How Does Workers’ Compensation Work In California?

Workers’ compensation in California is a state-mandated insurance program that provides medical and wage benefits to employees who suffer job-related injuries or illnesses. Employers pay for the insurance, and in return, they are protected from most lawsuits brought by injured employees. The system is designed to provide prompt care without the need for legal action.

When an employee is injured on the job, they must report the injury to their employer, who then files a claim with their workers’ comp insurer. Once approved, benefits begin, often covering emergency care, ongoing medical treatment, and wage replacement.

Workers’ Comp Income Benefits In California

Workers’ compensation in California provides several types of income benefits:

• Temporary Disability (TD): If an employee can’t work while recovering, TD pays about two-thirds of their gross wages, up to a weekly maximum set by the state. Payments begin after three days of missed work unless hospitalization is required.
• Permanent Disability (PD): If the employee doesn’t fully recover, PD benefits are paid based on a disability rating assigned by a doctor. The amount and duration depend on the severity of the permanent impairment.
• Supplemental Job Displacement Benefit (SJDB): This is a one-time payment (in the form of a voucher) that can be used for education or retraining if the worker can’t return to their old job and no suitable alternative is offered.

Statute Of Limitations For Workers’ Compensation Claims

In California, employees generally have one year from the date of injury to file a workers’ compensation claim. This deadline can be extended in certain situations—for example, if the injury wasn’t immediately apparent or if the employer failed to provide the required claim form. However, the sooner a claim is filed, the easier it is to document and process.

Death Benefits Under California Workers’ Compensation Law

If a worker dies due to a job-related injury or illness, their dependents are entitled to death benefits. These benefits include:

• Burial expenses (up to a set maximum amount)
• Weekly payments to surviving dependents, typically paid at the same rate as temporary disability benefits

The total amount depends on the number of dependents. A single dependent may receive less than a spouse with two children. Benefits are usually capped and paid out over time.

Workers’ Comp Settlements In California

There are two main types of settlements:

1. Stipulated Findings and Award: The employee continues to receive ongoing medical care paid by the employer’s insurance and receives permanent disability payments over time.
2. Compromise and Release: The employee receives a lump-sum payment that covers future medical care and disability benefits. In this case, the claim is closed permanently, and the insurer is no longer responsible for additional medical treatment.

Settlements must be reviewed and approved by a workers’ compensation judge to ensure fairness.

Penalties For Not Having Workers’ Compensation In California

Failing to carry workers’ compensation insurance in California comes with steep consequences:

• Civil penalties: Employers may face fines of $10,000 per employee and a stop-work order, halting all business operations until coverage is obtained.
• Criminal penalties: Failure to secure coverage is a misdemeanor that can lead to up to one year in county jail and a fine of up to $100,000.
• Personal liability: If an uninsured employee is injured, the employer can be held personally responsible for all medical bills and wage replacement benefits.

Workers’ comp is not optional in California. It protects workers from the financial burden of workplace injuries and shields employers from costly lawsuits—provided they comply with the law.

How Much Does Workers’ Compensation Insurance Cost In California?

The average cost of workers’ compensation insurance in California is approximately $2.00 per $100 of payroll, but rates can vary widely depending on your industry, claims history, and number of employees. High-risk industries like roofing or construction typically pay much more, while low-risk office jobs may have significantly lower rates.

Workers’ comp costs aren’t one-size-fits-all. A clerical business with no physical risk will pay far less than a contractor working on rooftops. Other factors like payroll size, safety protocols, and past claims also affect pricing. If your business has a history of workplace injuries, expect your premiums to be higher.

How Are Workers’ Comp Premiums Calculated In California?

Premiums are based on a few key components:

• Classification Codes: Each type of job is assigned a classification code with a corresponding rate. Riskier jobs have higher rates.
• Payroll: Premiums are calculated per $100 of payroll, so the more you pay your employees, the more you’ll pay for coverage.
• Experience Modification Rate (EMR): Businesses with a history of fewer claims can qualify for lower premiums through a favorable EMR.
• Location: Geographic factors such as local medical costs and legal trends also play a role.
• Safety Record: A clean safety record and implemented risk management practices can lower your premiums over time.

How Do I Get Workers’ Comp For My California Business?

To get a policy in California, you have a few options:

• Private Insurance Companies: Most small to mid-size businesses purchase coverage through private carriers licensed to operate in California.
• State Fund: California has a nonprofit State Compensation Insurance Fund (State Fund) that provides coverage, especially useful for businesses having trouble finding affordable private coverage.
• Self-Insurance: Larger businesses with strong financials may apply to self-insure, but this requires state approval and significant capital.

A convenient way to start is by comparing quotes from multiple insurers online. Insuranceopedia allows business owners to easily compare policies from top-rated providers, ensuring the right coverage at a competitive price.