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Do You Need Workers’ Compensation Insurance in California?

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A workers’ compensation insurance policy is a type of liability insurance where employers assume liability for potential worker injuries on or caused by the job, which their insurer pays. Workers’ compensation can help cover costs of work-related injuries and illnesses. California state law requires employers to have a workers’ compensation policy, and failure to do so is punishable by law.

California employers must provide employees with workers’ compensation benefits, regardless of the size of the employer or number of employees. California Labor Code Section 3700 specifies the requirements that businesses must follow.

To learn more about California laws, speak to an Orange County workers compensation lawyer today.

Workers’ Compensation Requirements for Employers

In the case of a business owner’s desire to purchase workers’ compensation insurance for only herself/himself, the sole proprietor inclusion is necessary for the workers’ compensation policy. Health, life, and/or disability income insurance are options for sole proprietor workers’ compensation.

A workers’ compensation policy must include all employees, including executive officers and directors of corporations. This only changes when the directors and officers fully own the corporation. In this case, they may elect to not receive workers’ compensation benefits.

California Labor Code Section 3351 lays the groundwork for who is actually an employee. It also determines all that a workers’ compensation policy covers. Different company types may have different liability concerns.

Employers must post a “notice to employees” poster in an obvious place at the work site for employees to access information about workers’ compensation coverage. Failure to post a notice is a misdemeanor, punishable by a fine up to $7,000.

Employers must purchase their workers’ compensation insurance from licensed insurance companies or through the State Compensation Insurance Fund. Self-insurance for workers’ compensation is also an option. In the case of self-insurance, the state must give approval for it to count as a valid form of workers’ compensation.

Penalties for Failure to Comply with Workers’ Compensation Laws

California Labor Code makes failure to have workers’ compensation a misdemeanor under Section 3700.5. As a criminal offense, the failure to have workers’ compensation is punishable by a fine of at least $10,000, county jail time up to a year, or both. The state also issues penalties up to $100,000 against illegally uninsured employers.

Beyond the legal ramifications, employers who do not have workers’ compensation insurance will be responsible for paying all bills related to the injury or illness of employees who suffer any harms at work. The injured or sick employee can also file a civil action lawsuit against the employer for being illegally uninsured, in addition to their workers’ compensation claim.

In cases of employers operating without workers’ compensation coverage, the Division of Labor Standards Enforcement will issue a stop order. With this order, the employer must stop all use of employee labor until they obtain coverage. Failure to comply with the stop order is a misdemeanor and punishable by up to 60 days in county jail, a fine up to $10,000, or both.

Financial Penalties for Lack of Workers’ Compensation Insurance

Labor Code Section 3722(b) allows for additional fines based on the premium the uninsured employer would have paid during the uninsured period, or the sum of $1,500 per employee during the uninsured period. The administered fine is whichever amount is greater.

Labor Code Sections 3722(d) and (f) cover cases where the employee filed for workers’ compensation and the judge finds that the employer did not secure insurance. After the dispute the employer may face a penalty of a maximum of $100,000, dependent on the number of employees and if the employee’s claim that brought the issue to light was compensable.

These fines are in addition to the consequences of simply not possessing workers’ compensation insurance that fall under Labor Code Section 3700.5. Anyone may report an uninsured employer to the Division of Labor Standards Enforcement.