What Are the Workers’ Compensation Requirements in California?

When Is Workers’ Compensation Required in California?

Under California Labor Code Section 3700, all employers with at least one employee—including part‑time or temporary workers—must carry workers’ compensation insurance.

This coverage requirement applies to:

• LLCs with employees (executive officers may opt out)
  
• Most sole proprietors and single-member LLCs (unless in roofing or specific high‑risk trades)
  
• Businesses working with independent contractors—misclassification risks still apply.
  

Even a single employee triggers the mandate.

What Does Workers’ Compensation Cover?

California’s no-fault system ensures injured employees receive benefits without litigation. Coverage typically includes:

• Medical care for work-related injuries
  
• Temporary and permanent disability benefits
  
• Supplemental job displacement or return-to-work support
  
• Death benefits and funeral costs for families
  
• Exclusive remedy protection—employees generally can’t sue for workplace injuries if covered
  

What Are the Minimum Coverage Requirements?

While typical policies automatically include standard California limits, state law specifies minimum liability thresholds employers must meet:

• $100,000 per occurrence
  
• $100,000 per employee
  
• $500,000 policy aggregate
  

These ensure adequate protection if an employee needs more than standard benefits.

What Are the Penalties for Not Carrying Workers’ Comp?

Failing to have valid workers’ compensation insurance in California is considered a misdemeanor, with several serious consequences:

• Financial penalties: Starting at $10,000, up to $100,000
  
• Possible imprisonment: Up to one year in county jail
  
• Stop orders: Operations must cease until coverage is obtained
  
• Liability for employee medical costs and legal claims
  
• Repayment obligations to the Uninsured Employers Benefit Trust Fund (UEBTF) if employees make claims.
  

In short—lack of coverage puts your business at significant legal and financial risk.

What Are Employers’ Responsibilities After an Injury?

Once an injury occurs, California law requires employers to act promptly:

• Provide the employee with Form DWC-1 (Notice of Potential Eligibility) within one business day
  
• File the Employer’s First Report of Injury (Form 5020) with the insurance company within five days—even if the claim form isn’t returned
  
• Report serious injuries (e.g., hospitalization, amputation, death) to Cal/OSHA within eight hours
  
• Maintain required posters and notices for employees explaining their rights and claim procedures
  

What Affects Premium Costs in California?

Premiums vary based on:

• Payroll size
  
• Industry risk classification
  
• Experience rating (modifiers based on your claims history)
  

Some business types can lower premiums with safety programs, return-to-work initiatives, or tailored pay-as-you-go options. California’s State Fund—the state workers’ comp insurer—also provides affordable options with safety resources and training.

Why This Matters in California

With frequent workplace claims and strict enforcement by the Division of Labor Standards Enforcement (DLSE), having coverage isn’t optional—it’s a legal survival tool.

By ensuring compliance, you:

• Protect your employees
  
• Shield your business from costly fines or lawsuits
  
• Ensure operational continuity
  
• Build trust with employees, clients, and regulators
  

How eWay Insurance Helps You Stay Covered

Navigating workers’ compensation in California can be complex. That’s where eWay Insurance can make a difference:

• Personalized guidance to determine coverage needs
  
• Access to competitive rates from reputable carriers
  
• Help navigating forms, filings, and payroll reporting
  
• Tips to manage claims, classification, and experience modifiers
  
• Bilingual service and support for California employers
  

We ensure you're compliant—with insurance that fits your business, not just a legal checkbox.

Final Thoughts

Workers’ compensation is non-negotiable for California employers with employees. The right policy ensures legal compliance, supports employee recovery, and ensures your business endures.

Let eWay Insurance guide you toward coverage that protects people—and your business. Fill out a contact form or call (323) 749‑5400 for a free compliance check and custom quote today.