Do I have to have Workers’ Compensation Insurance?

Yes, every California employer using employee labor, including family members, must purchase Workers’ Compensation Insurance (Labor Code Section 3700). If you fail to have Workers’ Compensation Insurance for your employees, it can be expensive as the DLSE is required to issue and serve a stop order/penalty assessment prohibiting further use of employee labor until you do purchase Workers’ Compensation Insurance.

The penalty assessed for failure to have Workers’ Compensation Insurance is $1000 per employee employed at the time the citation is issued. The citation amount increases to $1,500 per employee effective January 1, 2010.

However, there are exceptions for partnerships, if the only persons performing labor are the partners and corporations where the corporate officers are the sole shareholders; in which case, the corporation, officers and directors come under the Workers’ Compensation provisions only by election.

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