Carrying workers’ compensation insurance is an essential part of conducting business for many employers in California. Failure to do so not only puts the health and well-being of employees in jeopardy, but it also poses serious risks for the organization. The state may prohibit the use of employee labor until a policy is purchased, issue fines and penalties, and/or charge the employer with a criminal misdemeanor.

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California workers’ comp insurance requirements

Worker’s comp requirements vary by business type. Generally, employers who have at least one employee are required to fulfill three basic criteria:

  1. Purchase CA workers’ compensation insurance.
  2. Provide new hires with a pamphlet that explains their workers’ comp rights and responsibilities.
  3. Display the “notice to employees” in a conspicuous area at the workplace. This poster provides information about workers’ comp coverage and where to seek medical assistance for job-related injuries and illnesses.

Should any employee suffer an injury or illness at work, the employer must then:

  1. Provide the employee with a workers’ compensation claim form within one working day after the work-related injury or illness is reported.
  2. Return a copy of the completed form to the employee within one working day of receipt.
  3. Forward the claim form, along with the report of occupational injury or illness, to the claims administrator within one working day of receipt.
  4. Authorize up to $10,000 in appropriate medical treatment within one working day of receiving the employee’s claim.
  5. Provide transitional, light duty work whenever appropriate.

Employers who use a Medical Provider Network (MPN) may have additional requirements to meet.

How does workers’ compensation work in California?

Workers’ compensation insurance in California is essentially a trade-off between employees and their employer. Employees who suffer an on-the-job injury or a work-related illness receive certain benefits to assist them during their recovery. In return, they generally cannot sue their employer over the injury or illness.

What is generally covered by a policy?

Workers’ comp insurance in California may include the following benefits:

  • Medical care
    Any service reasonably necessary to treat an illness or injury may be covered, including doctor visits, hospital stays, physical therapy, lab tests, x-rays, medicines, medical equipment and travel costs. There are, however, limits on chiropractic care, physical therapy and occupational therapy.
  • Temporary disability
    Employees who are unable to work because of their injury or illness may be eligible to receive up to two thirds of their regular pay every two weeks. Minimum and maximum payments are set by the state.
  • Permanent disability
    An injury that causes a permanent loss of physical or mental function measurable by a doctor may entitle employees to long-term wage replacement. The specific payment amount depends on the employee’s age and occupation and the doctor’s medical reports. As with temporary disability, the state determines the minimum and maximum payments.
  • Supplemental job displacement
    Employees who have a permanent disability and are not offered regular, modified or alternative work by their employer may be eligible for a nontransferable voucher worth up to $6,000. It’s designed to cover the cost of any resources required to find a new job, i.e., licenses, certifications, retraining or skill enhancements at an approved school, etc.
  • Death benefits
    Payments may be made every two weeks to the spouse, children or other dependents of any employee who dies from a job-related injury or illness. The rate varies based on the number of dependents. California workers’ comp also provides a burial allowance.

How long do employees have to report an injury or illness at work in California?

California authorities recommend that employees notify their supervisors as soon as they experience an injury or illness at work, no matter how slight it may seem. Those who don’t report their injury within 30 days could lose their right to workers’ comp benefits.

The state grants more time for reporting injuries and illnesses caused by repeated exposure. The filing deadline is one year from the date an employee first notices symptoms.

How long can an employee remain on workers' comp after a claim?

Employees who are on temporary disability cease receiving payment when any one of the following happens:

  • They return to work
  • Their physician clears them to resume work
  • Their doctor states that their injury has improved as much as physically possible

California workers’ comp settlement types

Most workers’ comp claims are resolved smoothly, but disputes can arise, particularly if the employer believes the injury or illness did not occur as a result of the work environment. In such cases, the claim may need to be escalated to the California Department of Insurance (CDI) for investigation.

Claims that go to trial usually result in one of two types of settlements depending on the circumstances:

  1. Stipulated findings and award – the employer agrees to pay for the injured employee’s ongoing medical treatments and/or a set amount of weekly disability payments.
  2. Compromise and release – the employee receives a one-time, agreed upon payment and the case is considered resolved.

How much does workers’ compensation insurance cost in California?

Premiums vary by insurance provider based on:

  • Industry
  • Payroll
  • Past history of work-related injuries, i.e., experience modification
  • Special underwriting adjustments
  • Eligibility for group or dividend programs

Cost, however, is just one factor when shopping for a CA workers’ comp policy. Employers should also consider the services provided by the insurer, their familiarity with the industry, the doctors in their network and the accessibility of their claims adjusters.

Where can employers get workers’ comp for their California business?

To obtain a CA workers’ comp policy, employers generally have three choices:

  1. Purchase coverage from a licensed, independent insurance company
  2. Purchase coverage from the State Compensation Insurance Fund
  3. Self-insure the organization

Commercial broker-agents can help with the first two options. The third requires state approval and certain financial requirements must be met.

Frequently asked questions about CA workers’ comp

What do I risk by not having workers’ comp insurance?

Failing to carry workers’ comp when required to do so is a criminal offense. Employers who break CA workers’ comp laws may be subject to:

  • Fines and penalties
  • Imprisonment
  • Civil lawsuits
  • Stop work orders preventing the use of employee labor

What’s more, if an employee is hurt on the job, the employer may be responsible for paying all related medical bills out of pocket.

Who is exempt from workers' compensation insurance in California?

As long as they are not engaged in roofing, sole proprietors in California are generally exempt from worker’s comp regulations.

Does an LLC need workers' comp in California?

Any LLC with at least one employee requires workers’ comp in California. However, the executive officers and directors may choose to exclude themselves from workers’ comp CA benefits if they fully own the corporation.

Do self-employed workers or a single member LLC need workers' comp in California?

California requires self-employed individuals to carry workers’ comp if they are roofers. All others are generally exempt.

What is the minimum for workers comp in California?

The minimum number of employees that necessitate worker’s comp is one.

This guide is informational only and intended to be used as a starting point in analyzing an employer’s workers’ compensation obligations. It is not a comprehensive resource of requirements. It offers practical information concerning the subject matter and is provided with the understanding that ADP and its affiliates are not rendering legal or tax advice or other professional services. Please consult your personal tax or legal advisor should you have specific questions related to your circumstance.