Do I really need Workers’ Compensation insurance for my contracting business in California?
In a nutshell, yes. You don’t just need it, you MUST have it to do business in California. It is required by California state law, even if you have only one employee. Some contractors need to carry Workers’ Compensation insurance even if they have no employees but themselves. Even temporary employees must be covered by your Workers’ Compensation policy.
The reason is simple. Workers’ Compensation protects workers who are injured on the job or develop a work-related illness. It makes payments directly to workers to make up for some of the wages lost due to work-related injury or illness. It also helps pay their medical expenses, including rehabilitation costs. Without Workers’ Compensation insurance, employers are responsible forpayingall costs stemming from a work-related accident or illness.
In fact, if you don’t have Workers’ Compensation insurance for your contracting business you are breaking the law. Under California law, it is a misdemeanor and you could be fined as much as $10,000 or sent to jail for up to a year. The state will also issue a stop order that prevents you from using any employee labor until you have a Workers’ Compensation policy.
Doesn’t the state of California provide Workers’ Compensation insurance that I can buy?
California requires you to have Workers’ Compensation coverage but it does not provide it. You must buy a Workers’ Compensation policy from an insurer licensed to do business in California or you must become a self-insured employer. Only companies with a net worth of 5 million and a net annual income of $500,000 may become self-insured. Even then, approval from the state and a security deposit are required. The vast majority of contractors purchase coverage through an insurance agency or broker licensed to sell Workers’ Compensation policies in California.
Do my employees contribute to the cost of Workers’ Compensation insurance?
Sorry, but no. California requires employers to pay for the Workers’ Compensation policy that covers their employees.
Isn’t there a lot of administrative work involved with Workers’ Compensation?
Small contractors often worry about having to do a lot of paperwork. Yes, there are a few things you will have to do, but your insurance carrier will get you started and usually acts as administrator. The state of California provides information for employers and employees on the Division of Workers’ Compensation website.
There is a posting requirement, which is easy to meet. When you receive the “Notice to Employees” poster, simply hang it up in a place where employees will see it—maybe in a lunch or break area, or near the water cooler. There is also a pamphlet you must give to new employees, explaining their rights and responsibilities if they suffer a work-related injury or illness.Your insurance carrier should give you a supply of claim forms that employees must complete when a work-related injury or illness occurs. As the employer, you will also need to submit a report for each incident. There are tight deadlines for these items, so it’s important to act promptly.
What happens when an employee wants to come back to work but has work restrictions?
People are usually eager to get back to work after an injury or illness. And work is usually considered good therapy. But recovering employees may need to ease back into the work routine rather than jumping back in with both feet. The treating doctor may say that an employee can return to work, but with certain limits or work restrictions. The doctor’s report will say whether the employee can perform regular work, modified work, or alternative work. You might need to make some changes to the kind of work, or the amount of work, the employee does. Or maybe you would need to change the way the work is done, or give the employee a different job altogether. The goal is to work something out to make it possible for employees to get back to work and get on with their lives.
Why do employees have to go to specific doctors when they make a Workers’ Compensation claim?
California’s Division of Workers’ Compensation has approved certain groups of doctors, or Medical Provider Networks (MPN), to treat employees who have submitted Workers’ Compensation claims. Each insurance carrier has its own MPNs, but some allow employees to pre-designate their own personal doctor.
Where can I go to learn more?