Starting a business in California oftentimes means tackling workers’ compensation responsibilities from day one. California law requires all employers to provide workers’ comp insurance, even if you have just one employee. Understanding these requirements isn’t optional. Compliance is essential for protecting your business, avoiding penalties and ensuring your employees have proper coverage when accidents happen.
Let’s explore the basics of workers’ compensation in California so you can comply with the law and safeguard your new business.
Mandatory Coverage
California law requires all employers to provide workers’ compensation insurance, with almost no exceptions. The requirement applies whether your business has one employee or a hundred. For workers’ comp purposes, an employee includes full- and part-time workers, temporary staff, minors and even family members who work for your company. In some cases, independent contractors may also legally be employees if you control how or when they perform their work.
As an employer, you must facilitate immediate medical care for injured workers. There should also be return-to-work programs to accommodate medical restrictions during recovery.
Failing to carry proper coverage leads to serious consequences. Your business could face significant per-incident fines, stop-work orders, lawsuits from injured workers and even criminal charges with possible jail time. The Department of Industrial Relations oversees workers’ compensation in California, and its Division of Workers’ Compensation handles day-to-day administration and enforcement.
Getting Covered
You can secure workers’ compensation coverage through either the State Compensation Insurance Fund or a private insurance carrier authorized by California. The State Fund ensures all employers can obtain coverage, even high-risk operations that might not otherwise be insurable. Accurately classifying employees and reporting correct payroll figures are crucial for proper premium calculations. Misclassification can lead to premium adjustments and penalties.
California law requires you to display a “Notice to Employees” poster in a visible location. The poster informs workers of their rights and provides instructions if they’re injured. You must also provide claim forms promptly and report incidents to your insurance carrier within statutory timeframes. Review your policy regularly, especially when your business changes, particularly if you hire new people or alter your organization’s structure.
Employee Rights and Responsibilities
Workers’ compensation provides benefits to injured employees. These include:
- Medical treatment for work-related injuries
- Temporary disability payments during recovery
- Permanent disability compensation for long-term injuries
- Death benefits for families of workers who die on the job
Employees must report injuries to their employer promptly, usually within 30 days, if they mean to file a claim. Delayed reporting can complicate claims and potentially limit access to benefits.
Common Pitfalls
A major mistake some new business owners make is misclassifying employees. Many businesses are tempted to classify workers as independent contractors to avoid providing coverage. California applies strict tests to determine proper classification, and the penalties for misclassification are severe.
Poor records-keeping delays legitimate claims and often increases costs through penalties and litigation. Many employers also fail to implement effective return-to-work programs that could reduce claim costs and help injured workers recover. Be acutely aware that California law strictly prohibits retaliating against employees who file workers’ compensation claims. Retaliation can result in additional penalties and lawsuits beyond the standard workers’ comp obligations.
Conclusion
Complying with California’s workers’ compensation requirements from day one protects your business. Take a proactive approach. Understand your obligations, maintain proper coverage and implement safety protocols. As your business grows, leverage resources like your insurer, industry associations, legal counsel and the Division of Workers’ Compensation to stay current with changes.
