business owner reviewing workers compensation requirements

Does My Business Need Workers’ Compensation Coverage?

If you are a business owner, then you likely have a lot of questions about Workers’ Compensation Coverage. What is it? Do I need it? What does it cover? Where do I get it? 

In this article, we’ll answer all these questions and more. Let’s dive in.

What is Workers’ Compensation Insurance?

Workers’ compensation is built on an exchange between employers and employees. In the case of a work-related injury or illness, employees are entitled to effective medical treatment coverage while in return, employers are protected from legal action resulting from those injuries.

According to the California Employment Development Department, “Workers’ compensation provides benefits for workers when their injury or illness arises out of or is caused by their work. Workers’ compensation may also pay medical bills and benefits for temporary or permanent disabilities.”

Does My Business Need Workers’ Comp Insurance?

Under California Labor Code Section 3700, if a business employs one or more employees, the business must provide workers’ compensation coverage for each of those employees. However, if you are the sole proprietor of your company, you do not need to purchase workers’ comp insurance.

Why Does My Business Need Workers’ Compensation Insurance?

A workers’ compensation insurance policy provides:

  • Coverage for the costs of medical treatment, and
  • Lost time or indemnity benefits

Workers’ compensation is built on an exchange between employers and employees. In the case of a work-related injury or illness, employees are entitled to effective medical treatment coverage while in return, employers are protected from legal action resulting from those injuries.

Through workers’ comp, both parties are protected, which reduces conflicts when accidents occur in the workplace. 

In California, it is a criminal offense for business owners to fail to have workers’ compensation insurance if they employ one employee or more.

Do I Need Workers Comp for Part-time or Seasonal  Employees in California?

If a business employs one or more employees on a temporary or permanent basis, they are required to purchase workers’ comp insurance. The rule is the same for part-time and full-time employees or any employees that are related to the business owner. 

Do Members of an LLC Need Workers Comp in California?

If your business is a sole proprietorship, single-member LLC, or partnership, and you don’t have employees, California law usually doesn’t require you to have a workers’ comp policy.

Can a Business Owner Purchase Workers’ Comp For Themselves?

Sometimes a business owner or sole proprietor may choose to purchase workers’ compensation insurance to cover themselves only. This is possible. However, the inclusion of a sole proprietor must be clearly stated in the workers’ compensation policy or must be added as a coverage endorsement to the policy. 

Do 1099 Workers Need Workers’ Comp in California?

No, you don’t have to cover independent contractors under your workers’ compensation policy. Why? They’re not technically considered employees of your business.

However, if you transition any 1099 independent contractors to W-2 employees, you will need to purchase workers’ compensation for them.

Can Business Owners Be Fined For Not Providing Workers’ Compensation?

Business owners can face  several consequences for not complying with the law, including penalties and fines.

According to the Department of Industrial Relations (DIR), “if the Division of Labor Standards Enforcement… determines an employer is operating without workers’ compensation coverage, a stop order will be issued…. and failure to observe it is a misdemeanor punishable by imprisonment in the county jail for up to 60 days, or by a fine of up to $10,000, or both.”

Where Do I Get Workers’ Compensation Insurance?

Employers must purchase workers’ compensation insurance from either a licensed insurance company or through the State Compensation Insurance Fund (State Fund). Employers may also have the option to self-insure for workers’ compensation.

Where to Find Workers’ Compensation Coverage in San Diego

At Apex Risk & Insurance Services, we use The Apex Proven Process to learn about your business, strategize to assemble the right program for you, and use our deep industry and market knowledge to leverage the best pricing and coverage. 

This leaves small business owners with more time to do what they do best: Run their business knowing that their company and employees are protected.Check out our commercial insurance policies, then, read on to check out our full guide to workers’ comp for small businesses.