In the state of California, according to Labor Code Section 3700, employers who use at least one employee for labor are required to purchase Workers’ Compensation Insurance for their employees, even if those employees are family members. Not covering your employees with a workers’ compensation plan can result in steep penalties amounting to double the amount of the estimated premium for the employee, or $1,500 per uninsured employee. You may even accrue profit losses from not being able to use employee labor during the process of the penalty hearing and proceedings.
According to the California labor laws, an employee is considered any person who you engage or permit to work for you or your company and they need to be covered in case of an accident or work-related injury. The only exception is if the only people engaging in labor are the partners and in the case of corporations where corporate officers are the sole shareholders. In these instances, the corporation, officers and directors themselves have the choice whether to be covered by workers’ compensation or not. Employees that are classified as independent contractors are also exempt from these labor protection provisions and normally are not offered any kind of insurance or medical benefits upon accepting the contract.
If you are a sole proprietor of your business, whether you purchase a worker’s compensation plan is completely up to you. Further down the road, if you decide to hire at least one other employee, even if it’s on a temporary basis, you will then need to purchase a workers’ compensations insurance plan that works best for your specific situation.
Due to various legal requirements, it’s unusual for a company to self insure unless its worth more than $5 million, but can benefit larger corporations because it gives them the control of administering their own workers’ compensation claims.
For more information and to find out how we can assist you, please email us or call Tony Moreno Insurance at (909) 986-2550