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Does Your Business Need to Carry Workers Comp Insurance?

Workers compensation insurance can be a significant expense, especially for a small business. With few exceptions, the law in California requires every business with even one employee to carry workers compensation insurance. However, the question can become somewhat muddled for very small and closely held companies, such as sole proprietorships and family enterprises.

When determining if a small business is required to carry workers compensation insurance, the California Department of Industrial Relations considers several rules and guidelines:

  • There is no distinction between full-time and part-time employees. A company must still carry workers comp insurance even if it only employs part-time workers.
  • Independent contractors are not considered employees. However, simply calling a worker an independent contractor may not be enough if the actual nature of the relationship resembles that of an employer and employee.
  • In the case of incorporated or otherwise organized businesses, executives and directors are considered employees unless they are also the sole owners. When a company has no employees other than officers and directors who are also the sole owners, it may not have to carry workers compensation insurance. If, however, the company has officers or directors who are not also owners or a part owner who is not also an officer or director, workers’ comp insurance may be necessary.
  • Roofers must always carry workers comp insurance, even if they are sole proprietors and have no employees.

Navigating workers compensation requirements and regulations can be a challenge for entrepreneurs and business owners. Working with a California workers comp law firm that understands employers’ needs can help you avoid noncompliance, fines and other liabilities.

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