The employer’s guide to California workers’ comp insurance

Are you a small business owner in California? You might need workers’ compensation insurance. But finding the right coverage can be like trying to find a needle in a haystack.

We’re here to help. At Huckleberry, we’re small business insurance experts, and we put together this guide to CA workers’ comp laws in simple language. Here’s what you need to know.

Is workers’ comp insurance required in California?

Workers’ compensation insurance has a long history in the U.S. It’s the oldest social insurance program in the nation, and California requires it.

If you’re a California employer, you must have workers’ comp insurance—even if you have just one employee. It doesn’t matter if the employee is full-time, part-time, or seasonal.

A few exceptions exist. You generally don’t need to buy a policy if your business is a sole proprietorship, single-member LLC, or partnership and doesn’t have any employees. But here’s the kicker: The exception doesn’t apply if you’re a roofer. Roofing businesses must have workers’ compensation coverage whether or not it hires employees.

What if you hire independent contractors? You don’t typically have to include them in your policy because they’re not technically an employee of your business.

But mislabeling a worker as a contractor instead of an employee is common. It can create liability for employment taxes and penalties—talk to your accountant for help classifying your staff.

If you are the only worker in your California business, you’re not required to buy workers’ compensation insurance for yourself. It isn’t always the best choice, but you can purchase coverage to protect yourself if you operate your business as a sole proprietor.

However, the coverage for sole proprietors isn’t automatic. California requires the policy to state coverage for a sole proprietor expressly. Otherwise, you may have to add this option as a policy endorsement.

What happens if I don’t get workers’ comp in California?

CA workers’ comp laws are pretty specific. If you own a business, you generally must have a workers’ comp policy in place. If you should have coverage and get caught without it, the consequences are serious.

Buckle up—this isn’t pretty. Here’s what can happen if you don’t get workers’ comp coverage for your California business:

• You could be charged with a crime. According to the California Labor Code, not having coverage is a misdemeanor.
• You could personally face fines—and they’re not cheap. The law states the fine can’t be less than $10,000 (the max penalty is $100,000).
• You could face jail time. Your sentence could vary, but a standard misdemeanor can include jail time of up to 6 months.
• You may have to shut down your business. The State of California could issue a “stop order.” That means you’ll need to stop employing people until you get workers’ comp coverage for your company.
• You could be responsible for paying your employee’s medical bills (which is, by the way, what workers’ comp is supposed to do).
• An employee could sue you. And, since California doesn’t enforce a financial cap on these lawsuits, the cost of a settlement could be very expensive.
• When you do purchase workers’ comp, your coverage will probably be much more expensive. Insurers view you as high-risk because of the coverage gap and can charge higher rates.

In the end, any money you might save by going without workers’ comp coverage is not worth the risk—to you or your employees. Don’t wait. Get a workers’ comp estimate today.

I own a business in California. Do I need to purchase workers’ comp for myself? Can I exclude any officers?

CA workers’ comp laws don’t require sole proprietors to purchase workers’ comp coverage for themselves. However, you can—and some business owners do.

Remember that buying a policy isn’t usually the best option for a sole proprietor without employees. Not every insurer allows it, so check with the provider if it’s something you’re interested in doing.

The situation gets a little more complex as your company gets bigger, especially if your company is a corporation or transitions into one as the business grows. When that happens, you may want to exclude officers, directors, or partners from your policy.

The good news is it’s possible—but only if they meet specific requirements and sign a waiver to opt out.

How do I get workers’ comp in California?

Getting a workers’ comp policy for your California business is easier than you think. The right insurance carrier will walk you through the requirements and policy options to make sure you have the proper coverage in place.

There are two ways to buy a workers’ comp policy:

• You can get coverage the old-fashioned way. In other words, you find a broker, fill out a lengthy questionnaire, provide necessary supporting documentation, and wait for a quote. It gets the job done, but the process can take a few weeks to complete.
• You can get workers’ comp the digital way. Buying a policy online is a straightforward option. It doesn't require stacks of paperwork, and getting a quote takes about 5 minutes.

Technically, there’s a third option: Become self-insured. It requires state approval, a net worth of at least $5 million, a net income of $500,000 per year, and a security deposit. However, being self-insured for workers’ comp isn’t common for California small business owners.

What is the cost of workers’ comp in California?

The average cost of a California workers’ compensation policy is $183 per month. It’s important to know that the state doesn’t regulate workers’ comp premium rates. How much you pay depends on various factors—and your rate can vary from one insurer to the next.

For example, your workers’ comp calculation is based on:

• The industry of your business
• The location of your business
• The kinds of jobs your employees do
• The payroll generated by your employees
• The company’s safety record

Other minor factors can come into play, depending on the insurance provider you choose. Keep in mind that cost is only one consideration. You also want to ensure you get the right services to fit your small business, policy management options, access to the claims adjusters, and a medical provider network that your employees can get to easily.

If cost is a primary concern, look at options to lower your workers’ comp premiums. Cutting payroll costs will likely have the biggest impact, but that isn’t always possible.

Give your employees proper training on equipment that could be dangerous, keep the workplace tidy, and consider implementing a safety program —workers’ compensation insurance companies can reward safety measures with lower rates.

What are the workers’ compensation insurance limits in California?

The neat thing about workers’ comp is that you don’t have to worry about your limits. The CA workers’ comp laws set all coverages. Nice, right?

Because of that, you don’t need to make complex coverage decisions—when you provide information about your business, your rate is automatically calculated based on payroll and other factors. However, you need to get a policy with certain minimums for employer liability:

• $100,000 per occurrence
• $100,000 per employee
• $500,000 total policy value

Those are the minimum policy limits. You can choose to buy coverage over and above that amount to increase your liability protection.

What happens if your employee’s medical bills and other workers’ comp benefits exceed that limit? Don’t worry—you aren’t responsible for paying it out of pocket. The minimums apply only if the injured worker sues your company for additional damages that workers’ comp doesn’t provide.

Generally, there isn’t a cap or limit on the number of benefits an employee can get through a workers’ comp claim. And that’s good news for small businesses. After all, a severe workplace injury resulting in a disability might require financial payments and medical support for the rest of a worker’s life, and workers’ comp coverage would provide these benefits without a time limit.

So, what does workers’ comp cover in California?

Now we know that California workers’ compensation law requires most small businesses to buy coverage, and policies don’t have a cap on benefits. So, what does it cover?

Workers’ comp in California is a no-fault workers’ compensation system. As long as you’re covered, workers can’t sue you in court. It also means that employees don’t have to prove the employer was at fault for the injury.

If the injury is work-related, then your policy should cover:

• Medical care
• Temporary disability benefits
• Permanent disability benefits
• Supplemental job displacement benefits
• Death benefits (in severe cases)

One primary purpose of workers’ comp is to pay for lost wages and medical expenses if one of your employees has an illness or injury related to their job. For example, your employee could claim workers’ comp benefits if they injured themselves while lifting a heavy box at work—or even for a repetitive use injury like carpal tunnel syndrome.

Some impairments can result in temporary or permanent disability—your policy can cover disability payments, too.

Supplemental job displacement benefits offer retraining, vocational rehabilitation, or skill enhancement opportunities. Vouchers are redeemable at state-approved or accredited schools, and the recipient could qualify for additional payments through the Return to Work Supplement Program.

If the worst happens, workers’ comp will pay death benefits. A spouse, children, or another dependent can receive payments if an employee dies from a work-related injury or illness.

Workers’ comp doesn’t usually cover injuries during “off the clock” times like lunch breaks. It also won’t cover incidents that happen while an employee is commuting to or from the job.

What should I do if my California employee is injured?

While you hope never to have an injured worker, sometimes accidents happen. If your employee is hurt or gets ill on the job, don’t panic.

The most important thing to do is to get immediate medical attention. In some situations, you may be able to transport the employee to the hospital or walk-in clinic. But don’t hesitate to call 911 to request an ambulance if necessary.

After you get medical help for your team member, go through the following steps:

1. If the injury is severe, find your nearest California Division of Occupational Safety and Health Administration (OSHA) to report the injury. You must report employee death within eight hours—you can report hospitalizations, amputations, or eye loss within 24 hours of the time and date of injury.
2. Move employees to a safe place to reduce the risk of additional injured workers and review the situation. Ask yourself, how severe is the injury? What caused the accident?
3. Gather information and write down relevant details while it’s still fresh in your mind. Keep evidence, such as equipment and photos of the scene, and contact an attorney for legal advice if necessary.
4. Have your employee complete the top section of Workers’ Compensation Claim Form DWC 1. After completing the employer section, submit copies to your insurer or claims administrator and give a copy to the employee.

Throughout the claim, maintain open lines of communication with your injured employee, the doctor, your claims adjuster, and the insurance agent. It can speed up the claims process to help your employee get the funds needed to pay for treatment and build trust with your employee.

You’re not alone. Get support from Huckleberry

CA workers’ compensation laws can be challenging to navigate, even for the most skilled entrepreneur. Luckily, you’re not alone. Your insurance company can guide your next steps to help your employee get the medical treatment and workers’ compensation benefits they need.

Huckleberry can help you get the support you need, too. We provide lightning-fast quotes for California workers’ comp insurance—the process is entirely online, and we can get you covered in less time than it takes to brew a cup of coffee.