California Workers’ Compensation: Employer Requirements
California requires workers’ compensation from the first employee. Coverage rules, exclusions, posting duties, injury deadlines, and penalties.
California Workers’ Compensation
Who must be covered, where the policy comes from, what to post, and what to do the day someone gets hurt
The first time I watched a small employer get this wrong, the business had four people and a policy that had lapsed at renewal because the invoice went to an email nobody read. Nothing happened for seven months. Then a warehouse hand dropped a pallet on his foot, and the arithmetic of those seven months arrived all at once.
California is unusually blunt about workers’ compensation. There is no headcount threshold to grow into, no grace period, and no version of the rule where a small team is too small to matter. The obligation starts with the first employee and the enforcement side is criminal, not just financial.
This page covers one state’s rules: who has to be covered, who can be left out, where the policy comes from, what goes on the wall, what the deadlines are, and what happens if you skip it. For how workers’ compensation works as an insurance product, read our explainer on workers’ compensation insurance. For hiring, wages, leave and termination rules in this state, use the California HR compliance guide.
Who Must Carry Coverage in California
Every California employer with at least one employee must carry workers’ compensation. The Division of Workers’ Compensation states it without qualification on its employer page: California employers are required by law to have workers’ compensation insurance, even if they have only one employee. Labor Code Section 3700 places the duty on every employer to secure the payment of compensation.
There is no threshold to grow into. Part-time counts. Seasonal counts. A relative on payroll counts. The duty attaches the day the first employee starts work, which means the policy has to be bound before the start date rather than after the first payroll run.
Two situations catch employers who think the rule does not reach them. Out-of-state businesses need California coverage if they have any employees regularly working in California, or if they enter into a contract of employment in the state. And roofers must obtain coverage even with no employees at all, an exception written for that trade alone.
If you use contractors for anything close to core operations, settle the classification question before you settle the insurance question. Our guides to AB 5 and the ABC test and the cost of misclassification cover the analysis in detail.
Who Is Excluded From Coverage
California’s exclusion list is narrow and mostly about owners, not about categories of work. Labor Code Section 3352 holds the full list, and the entries that matter to a small business are the ones covering owners, officers, partners and residential household help. Nothing in that list exempts agriculture, and nothing exempts casual labor generally.
| Worker type | How California treats them | Authority |
|---|---|---|
| Sole proprietor with no employees | Not an employee of the business, so no coverage is required. May buy a policy covering themselves voluntarily. Roofing is the exception: coverage is required with no employees. | LC 3351; DWC employer page |
| General partner or LLC managing member | An employee by default if receiving wages. May be excluded only by executing a written waiver stating under penalty of perjury that they qualify. | LC 3351, LC 3352(a)(17) |
| Corporate officer or director | An employee while rendering actual service for pay. Excludable only with at least 10 percent of issued and outstanding stock (or 1 percent where a close relative holds 10 percent), health coverage in force, and a signed waiver under penalty of perjury. | LC 3351(c), LC 3352(a)(16) |
| Owner of a professional corporation | Practitioner owners may be excluded on the same pattern: written waiver plus health coverage. | LC 3352(a)(18) |
| Household worker in a private home | Covered unless, in the 90 calendar days before the injury, the employment was or was contracted to be for less than 52 hours, or for wages of not more than $100. | LC 3351(d), LC 3352(a)(8) |
| Family member employed by parent, spouse or child | Excluded only within that same residential household category. A relative on the payroll of a normal business is an employee. | LC 3352(a)(1) |
| Agricultural and farm labor | No exemption. The exclusion list contains no agricultural carve-out, so farm employees are covered like any others. | LC 3352 |
| Casual labor | No general casual labor exemption exists. The closest thing is the 52 hour and $100 test above, and it reaches only residential household work. | LC 3352(a)(8) |
| Independent contractors | Outside the system only if genuinely independent. California presumes employee status and applies the ABC test, so the classification has to survive the test, not the contract. | LC 3357, LC 2775 |
| Volunteers for a public agency or nonprofit | Excluded where the person receives no remuneration for the service. | LC 3352(a)(9) |
Read the owner exclusions as paperwork, not as status. An officer who owns enough stock is still an employee until the written waiver exists, is signed under penalty of perjury, and is on file with the carrier. Health coverage has to be in force at the same time, which is the condition most often missed.
The full statutory list at Labor Code Section 3352 runs to nineteen paragraphs and includes volunteer ski patrollers, amateur athletes and unpaid officials at amateur sporting events. If your business is not one of those, assume everyone on your payroll is covered.
Where the Policy Comes From
A California employer has three legal routes to coverage: a licensed private insurance company, the State Compensation Insurance Fund, or self-insurance approved by the state. The California Department of Insurance describes the same three options in its workers’ compensation guide for employers.
The State Compensation Insurance Fund is worth understanding correctly. It is a state-operated nonprofit entity, and it competes for business on the open market rather than holding a monopoly. It also has a second job: acting as the insurer of last resort when private companies will not write a policy. If you run a high hazard operation and brokers keep declining you, that is the door that stays open.
Self-insurance is a real option in California and almost never the right one for a small employer. It requires a Certificate of Consent to Self-Insure from the Director of Industrial Relations. The Office of Self-Insurance Plans publishes the entry prerequisites: three calendar years in a legally authorized business form, an A or B credit rating for the three full calendar years before applying, and three years of certified, independently audited financial statements. The Division of Workers’ Compensation puts the financial bar at a net worth of at least $5 million, net income of $500,000 per year, and posting of a security deposit. New private self-insurers must also use a licensed third-party administrator for their first three years.
For most small businesses, that leaves a straightforward decision between carriers. Price the same classification codes with more than one, because California premium is driven by class code and payroll, and a misapplied code follows you for years through the audit. Our walkthrough of the workers’ compensation audit covers what the carrier checks at the end of the term, and the state-by-state view sits in workers’ compensation requirements by state.
Posters and the Time of Hire Notice
California has two separate workers’ compensation notice duties: one poster on the wall and one document handed to every new hire. They are governed by different statutes and satisfying one does not satisfy the other.
The Poster: DWC Form 7
Labor Code Section 3550 requires every covered employer to post and keep posted a notice in a conspicuous location frequented by employees, where it can be read easily during the working day. The Division of Workers’ Compensation publishes DWC Form 7, Notice to Employees: Injuries Caused By Work, on its forms page in English and Spanish, and it carries all the content the statute requires.
The poster has to name your current carrier or your self-insured status and say who adjusts claims. That means it is not a print-once document: it changes when you change carriers. Assembly Bill 1870 amended the required content effective January 1, 2025, adding a statement that workers may consult a licensed attorney and that attorney fees are in most cases paid out of the recovery, so a version printed before that date is out of date.
The New Hire Document: The Time of Hire Notice
Labor Code Section 3551 requires written notice to every new employee at the time of hire or by the end of the first pay period. It carries the Section 3550 information plus how to get medical care, the role of the primary treating physician, and a form for predesignating a personal physician or a personal chiropractor. The notice must be easily understandable and available in both English and Spanish.
The Division of Workers’ Compensation publishes a current time of hire notice at no charge, and it was formerly called the time of hire pamphlet. State notices are free, so a poster vendor invoice is never the only way to comply. The rest of the wall is covered in our guide to required workplace postings.
One more California document overlaps here. The notice to employee required by Labor Code Section 2810.5 for non-exempt hires must include the name, address and telephone number of the workers’ compensation carrier, so a carrier change updates that form too. Both documents belong in the same packet, which is the point of keeping a single California new hire paperwork checklist rather than assembling it per hire.
Injury Reporting Deadlines
California runs on a one working day clock for the employer and a 30 day expectation for the employee. Miss the employer side and you create a presumption problem; miss it repeatedly and you create a pattern that a claims administrator will not defend for you.
| Step | Who acts | Deadline | Authority |
|---|---|---|---|
| Tell the employer about the injury | Employee | Right away. If the employer does not learn within 30 days and that prevents a full investigation, the worker can lose the right to benefits | LC 5400, LC 5402; DWC |
| Hand over the DWC 1 claim form | Employer | Within one working day of notice or knowledge of the injury | LC 5401 |
| Return a dated copy of the completed claim form to the employee | Employer | Within one working day of receiving it back | DWC employer FAQ |
| Forward the claim form and the employer's report to the claims administrator | Employer | Within one working day of receipt | DWC employer FAQ |
| Authorize medical treatment up to $10,000 while the claim is investigated | Employer | Within one working day of the employee filing the claim form | LC 5402; DWC |
| File the Employer's Report of Occupational Injury or Illness, form 5020 | Employer | Within five days of obtaining knowledge, to the insurer, or to the Department of Industrial Relations if self-insured | LC 6409.1(a) |
| Report a serious injury, illness or death to Cal/OSHA | Employer | Immediately, which the regulation defines as no longer than 8 hours after the employer knows or would have known | LC 6409.1(b); 8 CCR 342 |
| Accept or deny the claim | Claims administrator | 90 days from the completed claim form, after which the injury is presumed compensable | LC 5402 |
| File the workers' compensation claim itself | Employee | One year from the date of injury, or from the last date benefits were provided | LC 5405 |
The five day report has a trigger worth memorizing. Labor Code Section 6409.1 requires a report of every occupational injury or illness that results in lost time beyond the date of the injury, or that requires medical treatment beyond first aid. A cut cleaned with a bandage from your own kit is not reportable. The same cut sent to urgent care is.
The serious injury report is the one with a hard money penalty attached. Failing to report a serious injury, illness or death to the Division of Occupational Safety and Health carries a civil penalty of not less than $5,000, and the regulation gives you eight hours, not a business day. Keep the Cal/OSHA reporting line and the online mechanism written down somewhere a supervisor can find at 6am, alongside your general OSHA obligations.
Penalties for Going Without Coverage
Operating uninsured in California is a crime, not a fee. Labor Code Section 3700.5 makes failure to secure the payment of compensation a misdemeanor punishable by up to one year in county jail, or a fine of up to double the premium that would have been paid during the uninsured period but not less than $10,000, or both. A subsequent offense raises the floor to a fine of triple the premium and not less than $50,000.
Separately, the state can stop the business from operating. Under Labor Code Section 3710.1 the director issues and serves a stop order prohibiting the use of employee labor until the employer complies. Conducting business in violation of that stop order is its own misdemeanor, punishable by up to 60 days in county jail or a fine of up to $10,000, or both.
| Assessment | Amount | Authority |
|---|---|---|
| Penalty attached to a stop order | $1,500 per employee employed at the time the order is issued | LC 3722(a) |
| Penalty for the uninsured period | The greater of twice the premium that would have been paid, or $1,500 per employee employed during the period | LC 3722(b) |
| Penalty where a claimed injury is found noncompensable | $2,000 per employee employed at the time of the claimed injury | LC 3722(d) |
| Penalty where the claim is compensable | $10,000 per employee employed on the date of injury | LC 3722(d) |
| Overall cap | $100,000, applied to these assessments other than the uninsured period penalty | LC 3722(f) |
| Criminal fine, first offense | Up to double the unpaid premium, not less than $10,000, plus up to one year in county jail | LC 3700.5 |
| Criminal fine, subsequent offense | Triple the unpaid premium, not less than $50,000 | LC 3700.5 |
| Violating a stop order | Up to $10,000, or up to 60 days in county jail, or both | LC 3710.2 |
Read the fourth row again. The $10,000 figure in Labor Code Section 3722 is per employee employed on the date of injury, not per claim. For a twelve person crew and one compensable injury, the arithmetic reaches the $100,000 cap before anyone has paid a medical bill.
Then there is the lawsuit. Labor Code Section 3706 lets an injured worker of an uninsured employer bring an action at law for damages as if the workers’ compensation system did not apply, which strips away the exclusive remedy that the system normally gives you. Labor Code Section 3708 then presumes the injury was a direct result of the employer’s negligence, and removes contributory negligence, assumption of risk and the fellow servant rule as defenses. No contract can restore them.
Liability can also reach past the company. Where an award is certified against an uninsured employer, Labor Code Section 3717 makes parents of the corporation and substantial shareholders, defined as those holding at least 15 percent of the value of the stock, jointly and severally liable along with the corporation. An LLC or a corporation is not a wall between a lapsed policy and the owner’s personal assets.
One quieter rule belongs here. Labor Code Section 132a makes it a misdemeanor to discharge, threaten to discharge, or in any manner discriminate against an employee because they filed or made known an intention to file a claim. The remedy is compensation increased by one half up to $10,000, plus reinstatement and reimbursement for lost wages and work benefits.
What to Do When an Injury Happens
Work the sequence in order and most of the deadlines take care of themselves. The Division of Workers’ Compensation sets out the employer’s duties in its employer FAQ, and everything below tracks that list.
Two habits make the sequence survivable in a business with no HR department. Keep a blank claim form, the time of hire notice, and the Cal/OSHA reporting details in one place that a supervisor can reach without asking you. And write down what happened while it is fresh, using a standard incident report rather than a text message.
The recordkeeping side is separate from the claim itself and is easy to forget once the medical care is arranged. Our guide to the OSHA 300 and 301 forms covers which cases go on the log and how long the records are kept.
Keeping the documents themselves in order is the part a platform can help with. FirstHR holds the signed acknowledgements, the new hire packet and the employee records, so proving that a specific person received the time of hire notice on a specific date is a lookup rather than a search through a filing cabinet. The rest of the state picture sits in the California compliance hub.
Frequently Asked Questions
How many employees before workers’ compensation is required in California?
One. California sets no headcount threshold at all. The Division of Workers’ Compensation states that California employers are required by law to have workers’ compensation insurance even if they have only one employee, and Labor Code Section 3700 puts the duty on every employer to secure the payment of compensation. Part-time, seasonal, temporary and family employees all count. The obligation attaches on the first day the first employee works, not at the end of a probationary period or after a payroll run, so the policy has to be in force before that person starts. Out-of-state businesses are covered too if they have employees regularly working in California or they enter into a contract of employment in the state.
Do I need workers’ compensation in California if I have no employees?
Usually no, with one important exception. A sole proprietor with no employees is not an employee of the business and is not required to carry coverage, although sole proprietors may buy a policy covering themselves voluntarily. The exception is roofing. The Division of Workers’ Compensation states that roofers must obtain coverage even if they have no employees. Be careful about assuming you have no employees: California presumes that anyone rendering service for you is an employee unless you can prove otherwise, and misclassifying a worker as a contractor does not remove the coverage duty. It simply means you were uninsured for someone the state considers an employee.
Can a corporate officer or LLC member opt out of California workers’ compensation?
Yes, but only under specific conditions written into Labor Code Section 3352. An officer or member of the board of directors can be excluded if that person owns at least 10 percent of the issued and outstanding stock, or at least 1 percent where a parent, grandparent, sibling, spouse or child owns at least 10 percent, is covered by a health insurance policy or health care service plan, and executes a written waiver stating under penalty of perjury that they qualify. A general partner of a partnership or a managing member of a limited liability company can be excluded by executing a comparable written waiver. Without the signed waiver on file, these people are employees and are covered by default. The waiver is a document, not a conversation with your broker.
Where does a California employer buy workers’ compensation insurance?
From a licensed private insurance company, from the State Compensation Insurance Fund, or by self-insuring with state approval. California is not a monopolistic state fund jurisdiction, so private carriers compete for the business. The State Compensation Insurance Fund is a nonprofit state entity that competes with those carriers and also serves as the insurer of last resort when private companies will not write the risk. Self-insurance requires a Certificate of Consent to Self-Insure from the Director of Industrial Relations. The Division of Workers’ Compensation describes the bar as a net worth of at least $5 million, net income of $500,000 per year and posting of a security deposit, which puts it out of reach for a typical small business.
How long does a California employee have to report a work injury?
The employee should tell a supervisor right away. The practical deadline is 30 days: the Division of Workers’ Compensation warns workers that if the employer does not learn about the injury within 30 days, and that delay prevents the employer from fully investigating, the worker can lose the right to benefits. The formal claim itself has a separate limit under Labor Code Section 5405, which is one year from the date of injury or from the last date benefits were provided. Employers should not use these deadlines as a screen. Once you have notice or knowledge of an injury, your own one working day clock for handing over the claim form starts, whether or not the employee filled anything out.
What is the penalty for not having workers’ compensation in California?
Failure to secure coverage is a criminal misdemeanor under Labor Code Section 3700.5. A first offense carries up to one year in county jail, or a fine of up to double the premium that would have been paid, but not less than $10,000, or both. A subsequent offense raises the minimum fine to $50,000. On top of that, the state issues a stop order that prohibits the use of employee labor until you comply, and running the business anyway is a separate misdemeanor punishable by up to 60 days in jail or a fine of up to $10,000. Civil penalties under Labor Code Section 3722 reach $10,000 per employee employed on the date of a compensable injury, with an overall cap of $100,000 on most of those assessments.
What does a California employer have to give a new hire about workers’ compensation?
The time of hire notice, formerly called the time of hire pamphlet. Labor Code Section 3551 requires written notice at the time the employee is hired or by the end of the first pay period, covering the information in Section 3550 plus how to get medical care, the role of the primary treating physician, and a form for predesignating a personal physician or personal chiropractor. The notice must be easily understandable and available in English and Spanish. Separately, the notice to employee required by Labor Code Section 2810.5 for non-exempt hires must name the workers’ compensation carrier. The Division of Workers’ Compensation publishes a current version of the time of hire notice for free.
Are household workers and farm workers covered in California?
Farm workers are covered with no agricultural carve-out. California’s exclusion list in Labor Code Section 3352 contains no agricultural exemption, so employees on a farm are employees for workers’ compensation like anyone else. Household workers are covered unless a narrow test is met. A person employed by the owner or occupant of a residential dwelling whose duties are incidental to the dwelling, including childcare, is excluded only if, during the 90 calendar days before the injury, the employment was or was contracted to be for less than 52 hours, or for wages of not more than $100. A regular nanny or housekeeper clears both figures quickly and is covered.