In almost every U.S. state, employers are required to carry workers’ compensation insurance if they have a certain number of employees. If you’re a business owner in California, you’ll need to purchase workers’ comp insurance if you have at least one employee that doesn’t meet the state’s exemptions criteria.

In this article, we’ll go over who you need to cover, who is exempt, and possible penalties for non-compliance.


How does workers’ compensation insurance in California work?


As an employer in the state of California, you must secure workers’ compensation coverage as soon as you have one or more employees. You can purchase insurance through a licensed insurance company or through California’s State State Compensation Insurance Fund. The state’s Department of Insurance website includes a directory of all licensed workers’ compensation insurance carriers.

Some employers can apply to be a self-insurer. To obtain self-insurer status, your business must post a security deposit as well as have a net worth of at least $5 million and a net income of at least $500,000.


Who needs workers’ compensation insurance in California?


All employees, including part-time workers, must be covered by your workers’ comp policy in the state of California unless they are on the list of exemptions.

If you are self employed or a sole proprietor, you aren’t required to purchase workers’ compensation insurance for yourself unless you’re a roofer. But even if you aren’t legally compelled to insure yourself, it could still be a good idea from a risk management perspective. Sustaining a serious injury while performing your work can cost you thousands of dollars in hospital bills and lost wages. Such a setback could be exponential more expensive than paying monthly insurance premiums.

As with most states, in California there are certain exceptions to who must be covered by workers’ comp insurance. Those exceptions are:

  • Domestic workers who are related to their employer
  • People working for aid or sustenance only (via religious, charitable or relief organizations)
  • Deputy clerks or deputy sheriffs working without compensation
  • Non-profit volunteers at recreational areas (camps, huts or lodges)
  • Ski patrol volunteers
  • Employees whose total work amounted to less than $100 or 52 hours
  • Self-employed or sole proprietors (except for roofers)

To see a detailed list of exceptions, visit this section of the California Labor Code.


What are the penalties for not having workers’ comp in California?


The state of California takes its workers’ compensation laws very seriously. Failure to provide employees with the required coverage is a misdemeanor punishable by up to 1 year imprisonment or a $10,000 fine, or both. The state can also issue an additional $100,000 in civil penalties to the offending employer.

Criminal and civil penalties aside, if an employee happens to get injured or become ill on the job, their employer will bear the full responsibility of providing the medical coverage and lost wages typically covered by workers’ comp.

Needless to say, skirting workers’ compensation requirements in California is a risky proposition that isn’t recommended for any business owner.


What does workers’ comp cover?

Medical costs

If one of your employees is injured or becomes ill on the job, workers’ comp can cover their immediate medical expenses such as ambulance rides, emergency room visits, x-rays, surgery and prescription medications.

For example, if a kitchen employee reaches into a sink and slices their hand on a broken glass, they might require medical attention. Workers’ comp could cover the costs of their emergency room visit, stitches and pain management prescriptions.

Lost Wages

Many work-related incidents can leave employees unable to work for several weeks or months. Workers’ comp can provide some relief for employees in the form of partial wage replacement.

If an employee breaks their foot in a work-related accident, they could end up stuck at home for multiple months. While they’re out of work, workers’ comp would cover some of their lost wages.

Ongoing Care

Some work-related injuries require long-term care such as physical therapy or pain management. Often, these injuries are more the result of repetitive workplace stress rather than a single traumatic incident. Chronic back issues for construction workers and carpal tunnel syndrome for office employees are two common examples of the types of workers who must receive ongoing care due to repetitive stress. If their claim is approved, workers’ comp can cover the costs associated with their ongoing care.

Death Benefits

If the unthinkable happens and an employee passes away because of a workplace incident, workers’ comp can cover funeral costs and other death benefits for the deceased worker’s family or beneficiaries.