California Workers’ Comp Basics for Employers
California expects every employer to carry workers’ compensation from the day the first employee starts. This guide covers who the rule reaches, how coverage is set up, the paperwork employers handle and how the premium is figured.
Who must carry workers’ compensation
The Department of Industrial Relations puts it plainly: California employers must have workers’ compensation insurance even if they have only one employee. Part-time staff count, and so do seasonal workers. Employers based in another state can need California coverage too, when their employees regularly work here or were hired under a contract made here.
A sole owner with no employees is not required to carry it, and the DIR suggests that health, disability or life insurance can be a better fit for a business of one. Some trades are treated differently, and the DIR notes that roofing contractors must carry workers’ compensation even without employees. If you are unsure whether people working for you count as employees, read our guide to employees vs. independent contractors in California.
Ways to secure coverage
Most small employers buy a policy from a private insurer or from the State Compensation Insurance Fund, the state-run carrier. The CDI’s small business guide ties the requirement to Labor Code section 3700. Larger organizations with substantial net worth and income can instead apply to the state to self-insure, which requires a certificate of consent and a security deposit, so it is rarely a path for a growing small business.
A standard workers’ compensation policy has two parts. Part one pays the benefits California law sets for injured employees. Part two, employer’s liability, addresses lawsuits connected to a workplace injury that fall outside the benefit system, and it carries its own limits that leases and contracts sometimes name. A commercial umbrella can add limits above that employer’s liability coverage.
What going without coverage costs
Operating without required coverage is a misdemeanor in California, the DIR explains, and it can bring fines, jail time or both. The state can also issue a stop order that bars the business from using employee labor until coverage is in place, which effectively closes the doors. Further penalties apply on top, and an uninsured employer answers for the cost of the injury itself.
The Uninsured Employers Benefits Trust Fund steps in to pay injured workers when an illegally uninsured employer fails to pay benefits ordered by the Workers’ Compensation Appeals Board. That protects the employee, not the business. A gap of even a few weeks between policies, or a new hire who starts before the policy does, is a risk no employer needs to take.
Paperwork before the first shift
The DIR’s employer FAQ lists two items every covered employer handles. First, post the Notice to Employees poster where workers can see it; your insurer can supply one, and failing to post it is itself a misdemeanor. Second, give each new hire a written pamphlet describing workers’ compensation rights and benefits, which the DIR calls the time of hire notice.
Add the policy number and the claims phone number to your onboarding file, and tell supervisors where the claim forms are kept. For the full sequence of steps around a first hire, including payroll and other coverage, see hiring your first employee: insurance steps.
When an employee reports an injury
California sets short deadlines for employers once they learn about a work injury or illness. The DIR’s guidance is that the employer must:
- Give or mail the employee a claim form within one working day of learning about the injury
- Complete the employer section and return a copy to the employee within one working day of receiving it
- Forward the claim form and the injury report to the insurer or claims administrator within one working day
- Authorize appropriate medical treatment within one working day of receiving the claim form
- Offer transitional or light-duty work when it is appropriate
Benefits the DIR lists include medical care, temporary and permanent disability payments, supplemental job displacement benefits, a return-to-work supplement and death benefits. The insurer manages the claim, but your quick reporting keeps it moving. Our guide on what to do after a business insurance claim covers the follow-through.
How the premium is figured
The DIR names three main factors in the annual premium: the classification of the work your employees do, the size of your payroll and your company’s history of work-related injuries, known as the experience modification. Classifications follow job duties, so a cook, a cashier and a delivery driver can each sit in a different class with a different rate.
Payroll at the start of the term is an estimate. After the term ends, the insurer usually audits actual payroll by classification and adjusts the premium up or down. Keep clean payroll records by role, and keep certificates on file for any subcontractors you pay, because auditors commonly ask for them.
Industry examples worth a closer look
Some workplaces raise classification and injury questions early. A gym or studio has front-desk staff, coaches and instructors whose duties differ, and the gym and fitness studio insurance checklist helps sort them. A daycare’s teachers lift children, kneel and move furniture all day, which the childcare center insurance checklist addresses alongside the center’s other coverage.
Whatever your industry, describe each role by what people actually do during a shift rather than by job title. That description is the foundation of an accurate policy and a smooth audit.
A few useful answers
Common questions
Does a California business with one part-time employee need workers’ comp?
Yes. The DIR says California employers must carry workers’ compensation even with a single employee, and part-time status does not change that. Have the policy in force before the employee’s first shift.
Where can a California employer buy workers’ compensation?
From a private insurer or the State Compensation Insurance Fund. Large organizations that meet strict financial standards can apply to the state to self-insure instead.
What notices does a California employer give about workers’ comp?
Post the Notice to Employees poster at the workplace, which your insurer can supply, and give every new hire the time of hire pamphlet explaining workers’ compensation rights and benefits.
How fast must I give an injured employee a claim form in California?
Within one working day of learning about the injury or illness, according to the DIR. Then forward the completed form to your insurer or claims administrator within one working day of receiving it back.
Why does a workers’ comp policy get audited after the term ends?
The premium starts from estimated payroll. The audit compares it with actual payroll by job classification, and the premium is adjusted to match what the business really paid.