Workers’ Compensation FAQ

We often get questions about Workers’ Compensation (Workers’ Comp)—one of the oldest and most important types of business insurance in the U.S. This FAQ breaks down the most common questions California employers ask, from legal requirements to payroll audits.

• 1. I have one part-time employee. Do I still need Workers’ Comp?

  Yes. California law requires all employers to carry Workers’ Comp insurance—even if you have just one employee, whether they’re part-time, temporary, or a family member.

• 2. Does my General Liability or BOP policy include Workers’ Comp coverage?

  No. Workers’ Comp is a separate policy from General Liability or Business Owner’s Policies (BOP). Even if they’re offered by the same insurer, they’re distinct coverages.

• 3. Are there penalties for not purchasing Workers’ Comp?

  Yes, and they’re serious. Failure to maintain coverage is a misdemeanor that can result in fines up to $100,000, possible jail time, and a stop-work order. If an uncovered employee is injured, you could also be personally liable for all medical bills and compensation claims.

• 4. My employee was negligent and got hurt. Are they still covered?

  Yes. Workers’ Comp provides no-fault protection, meaning employees are covered for work-related injuries or illnesses regardless of who caused them. In exchange, employees generally can’t sue their employer for those injuries.

• 5. What if my employee payroll is lower than estimated? Do I get a refund?

  Yes. Premiums are based on estimated payroll. After your year-end audit, if payroll is lower than expected, you’ll receive a refund or credit. If it’s higher, you’ll owe the difference.

• 6. Do I have to report payroll?

  Yes. You’re required to report actual payroll at the end of each policy term. Failing to do so can lead to penalties up to three times the estimated premium and may affect your credit.

• 7. Are there different rates for different types of businesses?

  Yes. Rates depend on job classification and risk level. For example, a restaurant pays higher rates for kitchen staff than for office employees because the risk of injury is greater. Each employee class is rated separately based on their job duties and payroll.

• 8. Am I, the business owner, covered?

  It depends. Business owners and corporate officers are automatically included unless they choose to opt out. Many owners exclude themselves to lower premiums, preferring to use personal health insurance instead.

• 9. Do I need Workers’ Comp for out-of-state employees?

  Yes. If an employee is regularly employed in California or their contract originated in California, you must maintain coverage for them—even if they perform work elsewhere.

• 10. What’s the difference between Workers’ Comp and Health Insurance?

  Workers’ Comp covers work-related injuries and illnesses, including medical treatment, wage replacement, and rehabilitation. Health insurance covers non-work-related medical care. While health insurance is an optional employee benefit, Workers’ Comp is legally required for California employers.

• 11. Do I need Workers’ Comp for independent contractors?

  No, true independent contractors are not covered under Workers’ Comp.
  However, misclassifying employees as contractors can lead to severe penalties. Make sure classifications meet California’s ABC test before excluding anyone from coverage.

  For more details, visit California’s Independent Contractor FAQs.

If you have additional questions about Workers’ Comp or want help reviewing your business’s coverage, reach out to Wang Insurance. Our team can help ensure you stay compliant, avoid costly penalties, and keep your employees protected.