California requires all businesses to carry workers’ compensation insurance for its employees. As the most populated state in the country, the California workers’ compensation system is extensive: It provides coverage to nearly 700,000 businesses and delivers work comp benefits to almost 800,000 injured workers every year (2017 State of the Workers' Compensation Insurance System).
The state’s higher cost of living is reflected in insurance rates, but premiums have held fairly flat the past couple years. Below, we outline workers’ comp requirements for California small businesses.
You are required to carry workers' compensation insurance in California if you have any employees working in California, or are a roofer, even if you don’t have any employees.
Contractors: If you are an independent contractor, you might not be covered by the hiring company’s insurance policy and may need to provide proof of work comp. Are you an employee or an independent contractor?
Owners: Sole proprietors may choose to include themselves, and should do so by clearly stating this inclusion on the policy, or adding a coverage endorsement. Directors and officers must be included in coverage, unless the corporation is fully owned by the directors and officers.
In September 2019, California passed AB5, a new labor law extending wage and benefit protections to "gig economy" workers. Under the new law, some workers previously considered independent contractors — such as those at app-based tech companies Uber, Lyft and Doordash — would be reclassified as employees, and therefore eligible for employee benefits like workers' compensation coverage.
Employers at these and similar companies must pay close attention to how this issue is handled, to ensure compliance with the state's workers' compensation laws.
Remember: Employers must comply with the state where employees perform work - not necessarily where the business is located. If workers are in multiple states or temporarily working out-of-state, business owners may need to purchase additional coverage.
California has a private market. You can purchase a workers' compensation policy from any private insurance carrier or agency that is licensed to write in that state. Get started on a policy with WorkCompOne >>
California has a state fund that competes with the private market, and also provides a last resort for businesses that can’t secure coverage elsewhere.
In the past, self-insurance was a viable option for only large companies. However, group self-insurance, which allows several employers to jointly self-insure, has increased in popularity. All self-insurance programs must meet state guidelines.
According to the 2017 State of the Workers' Compensation Insurance System report, premiums are holding fairly steady, in contrast to the double-digit growth in 2010 through 2014, and rates decreased slightly in 2017. That said, California has the highest rates in the country, as a result of higher medical, legal and administrative costs, and a high frequency of permanent disability claims. This makes it difficult to find cheap workers' compensation insurance in California.
Ultimately, the nature of your business, payroll of employees being covered and past coverage and claims are all factors in how much your premium will cost. Learn more about workers' comp insurance rates >>
If you have questions about who needs to be covered by the policy and other questions about work comp, California’s Information and Assistance (I&A) Unit helps employers and employees understand their rights and responsibilities.
Work comp covers wage replacement and medical bills for employees injured on the job. To protect against other injuries at your place of business, you may need general liability insurance. Learn more about general liability >>