Workers’ Compensation FAQ
We often get questions about workers’ compensation, so we’ve compiled a simple and easy-to-understand FAQ. Here, we cover common inquiries about this essential coverage, which forms part of the U.S.'s oldest social insurance program.
In this article:
- I only have one part-time employee. Do I still need Workers' Comp?
- Does my General Liability policy or BOP provide Workers' Comp coverage?
- Are there penalties for nor purchasing Workers' Comp?
- My employee was negligent at work and got hurt. Is he still covered?
- What if my employee payroll is lower than estimated? Do I get a refund?
- Do I have to report payroll?
- Are there different rates for different types of businesses?
- Am I, the business owner, covered?
- Do I need Workers' Comp for out-of-state employees?
- What's the difference between Workers' Comp and Health Insurance?
- Do I need Workers' Comp for independent contractors?
Yes. California law mandates that employers carry Workers' Compensation insurance even if you only have one employee, regardless of whether they’re part-time, a family member, or temporary.
No. Workers' Comp is a separate policy from General Liability or Business Owner's Policies (BOP). Even if your insurer offers both types, they will be distinct policies with separate coverage.
Yes, severe penalties apply in California. Failure to carry Workers' Comp is a misdemeanor that can result in fines up to $100,000, possible jail time, and a stop-work order, which shuts down your business until coverage is in place. Additionally, you would be liable for all medical bills and compensation claims if an employee gets injured, which can be very expensive.
Yes. Workers’ Comp provides coverage regardless of fault. Employees are entitled to medical care for work-related injuries or illnesses, and in return, they cannot sue the employer for these injuries.
Yes. If your actual payroll is lower than your estimated amount, your premium will be adjusted accordingly, and you’ll receive a refund. Conversely, if your payroll exceeds the estimate, you’ll owe additional premium after an audit.
Yes. Workers' Comp premiums are based on estimated payroll. At the end of the policy term, you must report your actual payroll to determine the final premium. Failing to report payroll can result in penalties up to three times the estimated premium and could impact your credit.
Yes. Workers' Comp rates vary depending on the nature of your business and the roles of your employees. For example, a restaurant will have different rates for kitchen staff than for clerical employees, as the risk levels are different. Each class of employee is rated based on their specific duties and payroll.
Yes and no. Business owners and corporate officers are generally covered unless they choose to exclude themselves. Many owners opt out to avoid the higher premiums, preferring to use personal health insurance for coverage.
Yes. If your employee is regularly employed in California or their employment contract was established in California, you must carry Workers' Comp coverage for them, even if they work out-of-state.
Workers’ Comp is designed to cover workplace injuries and illnesses, while Health Insurance covers general medical care and non-work-related medical expenses. Health Insurance may be offered by employers as part of a benefits package, but Workers’ Comp is legally required for workplace-related injuries.
No. Independent contractors are not covered under Workers’ Comp. However, determining if someone is a true independent contractor involves more than just an agreement or contract. You should review all employment classifications carefully to ensure compliance. For more information on this, visit California's Independent Contractor FAQs.
If you have further questions about Workers' Compensation or need help getting the right coverage, feel free to reach out to one of our knowledgeable advisors. We're here to help protect your business and employees.