What does workers’ comp cover in California?
California workers’ comp insurance provides medical and financial benefits to employees who are injured or fall ill on the job.
California workers’ comp benefits include:
- Access to quick and effective medical care
- Temporary disability benefits until you can return to work
- Permanent disability benefits if you are unable to return to work
- Supplemental job displacement benefits to pay for retraining or skill enhancement
- A return-to-work payment to supplement lost earnings while off the job
- Death benefits to family members or dependents if you die
It’s worth noting that under California’s workers’ comp laws, the business owner can also receive coverage as part of the policy. This is not the case in some other states, so we recommend checking to ensure this coverage is included in the policy you choose.
That said, plan inclusions and limits can differ depending on the provider. It’s important to consider plan benefits (such as the ones above), as well as the overall cost, ease of access to in-network doctors, and access to claims handlers.
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Who needs workers comp in California?
California Labor Code Section 3700 requires all employers with at least one employee to have a workers’ compensation policy. This includes employers in the construction industry who may be exempt in other states.
Employers located outside of California are also required to have workers comp if they have an employee who works regularly in California.
According to the Business and Professions Code section 7125, special rules apply to some contractors who are required to carry workers’ comp insurance or a Certification of Self-Insurance regardless of whether they have employees or not.
Contract workers who are required to carry workers’ comp include:
- C-8 concrete specialists
- C-20 air heating, ventilation and air-conditioning specialists
- C-22 asbestos abatement specialists
- C-39 roofing contractors
- D-49 or C-61 tree service specialists
Workers’ Comp for Sole Proprietors
With the exception of some trades, most sole proprietors in California are not required to have worker’s compensation as long as they don’t have any employees.
That said, if you are a sole proprietor and want coverage, there are workers’ compensation plans available to you.
If you decide to get workers’ comp as a sole proprietor in California, you are required to ensure that your policy clearly states the inclusion of a sole proprietor or that the policy has a coverage endorsement for sole proprietors.
Alternatively, you might consider extending coverage to other types of insurance policies, such as health insurance, life insurance or disability income insurance.
California workers’ comp exemption requirements
Some companies may have employees who qualify for California’s workers’ compensation exemption. This means you wouldn’t need to have workers’ comp for employees that qualify for the exemption. If this is the case for your business, you may be required to file an exemption with the state.
For information on exactly which types of workers qualify for a workers’ compensation exemption in California, you should refer to the California Labor Code, Division 4, Part 1, Chapter 2, Section 3352.
In the meantime, here are a few general examples of who may qualify for an exemption:
- Business owners without employees (excluding some construction trades)
- Independent contractors, such as gig workers
- Some volunteers, such as volunteers at camps or lodges and non-profit volunteers
- Domestic workers who are family members of the employer
- Workers who receive aid or food in lieu of pay, such as from religious, charitable, or relief organizations
- Deputy sheriffs and deputy clerks
- Amateur sports officials and amateur student players
- Volunteer ski patrolmen or ski lift operators
Even if you are exempt by law, we recommend you still consider opting for a workers’ compensation policy as it can save you in the event of becoming injured on the job by paying your medical bills as well as lost wages. This is especially true if you work in an environment with high risk of injury such as electricians or handymen.
Consequences of getting caught without workers’ comp in California
The California labor code requires all companies with at least one employee to have workers’ comp. If you fall under this requirement and are caught without workers’ comp in California, the state will issue a stop order for all business activity related to your company.
In this case, you will have 60 days to get workers’ comp coverage and prove to the state that you have insurance. If you are unable to do so, you will be charged with a misdemeanor which can carry a 60-day jail sentence, a $10,000 fine, or both.
Additionally, the California Division of Labor Standards Enforcement team may also consider further action, which can include one of the following:
- A fine equivalent to twice the amount you should have paid in workers’ compensation premiums for the length of time you were uninsured.
- A fine of $1,500 per employee who was employed at your company during the time you were uninsured, according to Labor Code section 3722(b).
The Labor Code Section 3722(d) and (f) also explains what happens if one of your employees files a workers’ comp claim and you are found to not have a workers’ compensation insurance plan as required by law.
In this case, you may be charged with one of the following fines depending on whether the judge decides the claim requires compensation or not:
- If the claim requires compensation, you may be charged $10,000 per employee on the payroll at the time of injury.
- If the claim does not require compensation, you may be charged $2,000 per employee (maximum amount of $100,000) on the payroll at the time of injury.
Needless to say, you should ensure you have workers’ compensation secured before starting business operations.
What happens if an employee is injured and you don’t have workers’ comp?
According to Section 3700.5 of the California Labor Code, if an employee is injured and you don’t have workers’ compensation, it’s considered a criminal misdemeanor and carries a minimum fine of $10,000, a maximum one-year prison sentence, or both.
Apart from this, you will legally be required to pay all claims that arise from your employee’s injuries or illness.
The state of California can also issue you a separate fine of up to $100,000 as the employer.
Where to get workers’ compensation in California
There are three main options for getting workers’ comp coverage in California:
- Buying a plan from a licensed insurance provider
- Buying a plan from California’s State Compensation Insurance Fund
- Declaring yourself self-insured
Let’s take a closer look at these options below.
Buying a plan from a licensed insurance provider
Buying workers’ comp through a private insurer often makes the most sense as it is usually the easiest and the cheapest method. Since private insurers compete for clients, it’s generally easy to get a better deal and ensure you get the best business insurance coverage for your needs.
You can easily sign up for workers’ compensation online or over the phone when you opt to buy from a licensed insurance provider.
The quickest way to find a plan is to use an online quote tool that can match your specific business with the right insurance plan. These tools ask questions about your business, then show the best policy options based on your answers.
With a private insurer, you can also often find deals on other types of policies by combining workers comp with more types of coverage. For example, you may want to opt for a business owner’s policy which includes general liability, and commercial property insurance in one plan.
Buying a plan from the California State Compensation Insurance Fund
In California, the State Compensation Insurance Fund is a non-profit organization that can provide workers’ compensation insurance to businesses the same way a private insurance provider would. It’s self-supported from the revenues made off insurance premiums, similar to how a private insurer operates.
The main role of the State Fund is to serve as a fallback option for companies that are denied workers’ compensation insurance through a private insurer. As a result, State Fund policies can sometimes be a bit more expensive than getting a workers’ compensation policy through a private insurer.
Declaring yourself self-insured
Self-insuring allows employers to oversee their company’s workers’ compensation claims via an internal administration team or a third-party administrator. Although self-insurers get greater control over the claims process compared to the other options, it is arguably the hardest and most expensive method for providing workers’ comp.
In California, you must get state approval through the Office of Self-Insurance Plans to be able to opt for self-insurance.
Eligibility requirements for self-insurance in California include:
- Having a minimum net worth of $5 million
- Having a minimum net income of $500,000 per year
- Paying a security deposit
How much is workers’ comp in California?
The insurance provider Insureon states that the average cost of workers’ compensation insurance in California is $62 per month, versus the national average of $45 per month.
Get workers’ comp starting as low as $20 per month*
*Applies to quotes made through Insureon only. Average monthly premium calculations are estimates and may vary by state, insurance provider, and the nature of your business. Where required or allowed by state law, insurance taxes, service fees, and other surcharges may be included and billed separately from the premium.
The cost of workers’ compensation insurance is calculated on an individual basis for each business and can vary greatly depending on several factors, such as:
- The number of employees you have
- Type of employees and their class code
- Your payroll
- Your company’s claims history
Bearing this in mind, it’s best to specifically calculate how much workers comp will cost your business using a workers comp calculator or a similar tool.
