Can I exclude owners and officers from workers’ comp coverage in California?
Okay, let’s look at exactly who your California workers’ comp policy will cover—and whether you can exclude anyone from coverage.
First of all, here’s the guiding principle for workers’ compensation coverage in California: If you have at least one employee—pretty much any employee—you need workers’ comp. And normal employees don’t have the opportunity to waive their coverage. Coverage for them is required by California law, and there’s no way for them to opt out.
Remember, workers’ compensation is an important part of your overall California business insurance portfolio. It pays out medical benefits and lost wages to injured workers suffering from a work-related injury or occupational illness. (Death benefits, too, in worst-case scenarios.) Depending on the industry you’re in, a robust workers’ comp insurance coverage can be the difference between a minor inconvenience and millions of dollars in legal and medical fees.
But what if you don’t want your corporate officers or managing members on the policy? What if your business partner wants to waive coverage? In some cases, you can exclude those individuals from workers’ compensation benefits.
How do workers’ compensation insurance exemptions work?: FAQ
Let’s look at a few of the most common ways of organizing a business and how exclusions work in each instance.
Is the business a corporation?
In the case of a public or quasi-public corporation, your executive officers and directors—at least the ones that are actually working and getting paid for it—are automatically included in your policy. But any one of them can be excluded as long as they fill out and sign a written waiver and one of the following apply:
- They own at least 10% of company stock
- They own at least 1% of company stock and are covered by a health insurance policy or health care service plan, and they have a parent, grandparent, sibling, spouse, or child who owns at least 10% of company stock
(Note that inactive officers aren’t included in your policy, so you won’t need to worry about excluding them.)
An owner of a professional corporation may also be excluded from the policy if they fill out the waiver and are already covered by a health insurance policy.
In the case of a cooperative corporation, you may exclude any officer or member of the board of directors from coverage if they are covered by:
- A health care service plan or health insurance policy, and
- A disability insurance policy that is comparable in scope and coverage to a standard workers’ comp policy
They’ll also need to fill out the waiver. As goes the pattern. (Don’t worry: If you’re insured through Huckleberry, you can do all of this online.)
What if a business is a sole proprietorship?
If your business is a sole proprietorship, you—as the owner—are automatically excluded from workers’ comp. Also, since the State of California labor code considers spouses to be co-owners, you can exclude your spouse (again, if you are a sole proprietor).
In some cases, you can elect to be included in your own workers’ comp policy. Still, you should be aware that some insurers won’t write a policy covering a sole shareholder/business owner. (Buying a standard health insurance policy and disability insurance is usually a better bet for sole proprietors.)
Can business partners be excluded?
Business partners are automatically included in your policy. But if they are considered a General Partner, they can be excluded if they fill out a waiver with their insurance carrier.
What if my business is a Limited Liability Company?
All employees and working members of your LLC are automatically included in your California workers’ compensation policy. Working members can be excluded, though, if they execute a written waiver to the insurance company.