Workers compensation insurance is required by the State of California for all businesses that have at least one employee. Those who own a sole proprietorship and therefore only employ themselves are exempt from the requirement, but if they hire anyone else to do anything, they’ll need to buy workers compensation insurance or face some stiff penalties.
If the Division of Labor Standards Enforcement becomes aware that a business owner who meets the requirement is operating without workers compensation insurance, the first thing that will happen is that a stop order will be issued to the business. The stop order requires that the business owner cease using employee labor until workers compensation coverage is obtained. Ignoring or refusing to comply with the stop order is a misdemeanor that is punishable by up to 60 days in jail and/or fines of up to $10,000.
When an employee is injured and files a workers compensation claim before the business owner buys workers compensation insurance, the business owner faces a fine of $10,000 per employee that was on the payroll at the time the injury took place. The $10,000 fine is only if the claim is determined to be compensable, if it isn’t, the fine is reduced to $2,000 per employee on the payroll at the time the injury took place.
Last but not least, failing to obtain workers compensation insurance prior to hiring employees is in itself a misdemeanor offense. It’s punishable by up to 1 year in county jail and/or a fine of up to $10,000.
As you can see, not having workers compensation insurance is always going to cost more than having it. If you have any additional questions regarding workers compensation insurance, call Carol at 661-803-3803 or stop by InsuranceSCV.com for a FREE quote!