Employers in California have a responsibility to their employees. State law requires you to provide financially for employees who become injured on the job. That’s where worker’s compensation coverage comes into play.
What is Worker’s Compensation Insurance?
Worker’s compensation coverage protects employees if they are injured in an accident on the job. Generally, this insurance covers:
- Emergency and ongoing care, including doctor visits, surgeries, hospital stays and prescription medications.
- Rehabilitation, such as occupational or physical therapy.
- Medical equipment, including crutches, wheelchairs or specialized medical devices.
- Partial wage replacement while the employee is unable to work.
- Short-term or long-term disability of the injury results in temporary or permanent disability.
- Retraining costs if the employee cannot return to their previous job.
- Death benefits if the employee dies, which include financial support and funeral expenses.
Typically, employees are eligible for benefits if they are injured at the workplace or in an accident while on company business, or if they become ill with a work-related illness.
Do You Need Worker’s Compensation Insurance in CA?
California law requires virtually all employers with at least one employee to carry worker’s compensation insurance. Benefits are no-fault, which means that workers receive coverage for lost wages and medical care regardless of who caused the accident.
If you have at least one person on the payroll, you likely need worker’s comp.
What are the Benefits of Worker’s Compensation Insurance?
Even if your company is not required to have this type of insurance, investing in it provides advantages:
- Limits financial liability for work-related injuries.
- Provides immunity for most employee negligence lawsuits.
- Protects a business’s finances by shifting the unpredictable costs of medical bills, rehabilitation and lost wages to the insurance company.
Beyond this, worker’s compensation insurance helps cultivate a culture of safety in the workplace and boosts employee confidence by guaranteeing care if an accident occurs.
What Happens if You Don’t Carry Worker’s Compensation Insurance in CA?
California’s worker’s compensation laws are strict, and the penalties are severe. Under California Labor Code Section 3700, nearly every employer with at least one employee must have a valid policy.
If you don’t carry this coverage, you could face:
- Stop-work orders that shut down your business operations immediately.
- Fines that can reach tens of thousands of dollars.
- Criminal charges, as operating without required coverage is considered a criminal offense in this state.
- Full personal liability for the injured employee’s medical bills and lost wages if an accident occurs while you are uninsured.
The California Department of Insurance Fraud Division can also request proof of coverage at any time. Employers who cannot produce this proof within the required window face additional penalties.
In other words, going without coverage can far exceed the cost of a policy.
Who Counts as an Employee for Coverage Purposes?
An employer’s worker’s comp policy must generally include:
- Full-time, part-time, temporary and seasonal workers
- Employees of corporations, partnerships, LLCs and sole proprietorships
- Most family members working in the business
- Workers who are paid in cash
One common point of confusion is the difference between an employee and an independent contractor. California uses the ABC test to determine whether someone should be classified as an employee or contractor. Misclassifying to avoid coverage could leave you exposed to liability, so it is crucial to review your worker classifications with a licensed agent if you’re unsure.
Get a Quote Today
Every business has unique risks. Your worker’s compensation coverage should reflect that. Whether you’re a small business hiring your first employee or a growing company reassessing your coverage, we’re here to help you find the right policy at the right price.