Every California employer with employees must purchase Workers' Compensation Insurance. While the workers' comp requirement is pretty straightforward, the rule has a few exceptions.
Discover who is exempt from workers' compensation requirements.
Who is Exempt from Workers' Compensation Requirements?
While CA requires the vast majority of workers to be covered by workers' compensation, there are exceptions to the rule. This includes:
Business Owners: Typically, small business owners who are sole proprietors with no employees do not have to worry about workers' compensation coverage. Unless you're operating a construction business, which we'll cover further down.
Partnerships: Workers' compensation insurance is typically exempt when the persons doing the work are the partners who own the business.
Corporate Officers and Directors: In a corporation where the corporate officers are the sole shareholders, the officers and directors would only be required to carry workers' compensation if the decision was made by election.
Independent Contractors or Freelancers: Like sole proprietors, most independent contractors or freelancers are exempt from workers' compensation requirements (unless they hire someone to help them with their work). Beware of misclassifying employees as freelancers; misclassification is considered fraud.
Related Domestic Workers: If you hire your sixteen-year-old daughter to babysit your three-year-old son every day after school, this working relationship may be exempt from workers' compensation requirements because the domestic worker is related to you.
Certain Deputy Sheriffs and Clerks: In some cases in California, certain deputy sheriffs or deputy clerks may work on a volunteer basis. If they're working as volunteers and do not receive pay, they are exempt from workers' compensation requirements.
Workers Receiving Food and Shelter: Some non-profit organizations will exchange food and shelter as compensation instead of pay. In these instances, the workers receiving food and shelter in exchange for work are considered exempt from workers' compensation requirements.
Amateur Sports Officials and Sports Participants: Sports officials and participants who volunteer their time and do not receive monetary compensation are typically considered exempt. Even if these individuals receive equipment, uniforms, or financial reimbursement for transportation, travel, meals, lodging, and other expenses, they're likely exempt if they volunteer their time.
Volunteers: Volunteer workers, including non-profit volunteers, who do not receive compensation for their work are not entitled to workers' compensation benefits. However, if the volunteer position could qualify as a government employee, such as a volunteer firefighter, police officer, or person assisting during an emergency, they may be eligible to receive workers' compensation benefits.
Who Is NOT Exempt from Workers' Comp Requirements?
In California, if you hire an employee for your business, you are required to provide workers' compensation insurance for them. That includes:
- Full-time workers
- Part-time workers
- Seasonal workers
- Family members
- Workers who are not citizens
- Apprentice workers
- Elected and appointed paid public officers
- Incarcerated persons engaged in assigned work or employment
CA labor code defines an Employee as:
"Employee means every person in the service of an employer under any appointment or contract of hire or apprenticeship, express or implied, oral or written, whether lawfully or unlawfully employed."
If someone works for your business and gets paid, they're most likely considered employees and legally entitled to workers' compensation benefits.
Sometimes, you may be required to provide workers' compensation benefits or yourself, even if you have no additional employees.
CA Contractors and Construction Business Owners Must Carry Comp
As of 2023, the following contractors must carry workers' comp, even if they have no other employees:
- Roofing contractors
- Concrete contractors
- Warm-Air Heating, Ventilating and Air-Conditioning contractors
- Asbestos Abatement contractors
- Tree Service contractors
This list will continue to expand; by 2026, all licensed contractors and applicants will be required to carry workers' compensation insurance. No exceptions.