California Workers' Comp Requirements: Who Must Carry It and the Penalties for Going Without

Short answer: Yes, workers' compensation insurance is required in California for every employer with even one employee, full-time or part-time. California Labor Code section 3700 requires you to either buy a policy from a licensed insurer or get a certificate to self-insure from the state. Going without coverage is a misdemeanor with a fine of at least $10,000, and the state can shut down your use of employee labor with a stop order.

Key takeaways

• California requires workers' comp from your first employee. There's no minimum payroll and no exemption for part-time workers (Labor Code 3700).
• Sole proprietors and partners with no employees don't have to cover themselves. Officers and directors who own all of a corporation's stock can choose to exclude themselves.
• You must post the workers' comp notice at every work site and give new hires the state's workers' comp pamphlet.
• Penalties for going uninsured include a criminal fine of at least $10,000, a stop order, and a state penalty of $1,500 per employee or twice the premium you skipped, whichever is greater.
• If an uninsured employer's worker is hurt, the employer pays the claim itself and can also be sued in civil court.

Who must carry workers' comp in California?

Every California employer, other than the state itself, must "secure the payment of compensation" for its employees (Labor Code 3700). Most businesses do that by buying a workers' comp policy. Large, financially strong employers can instead apply to the Department of Industrial Relations for a certificate to self-insure.

Who counts as an employee is defined broadly in Labor Code 3351. Calling someone an independent contractor or paying them on a 1099 doesn't settle the question; California applies its own tests, and a worker you treat as a contractor may be an employee for workers' comp purposes. See our guide to workers' comp for independent contractors before you rely on that label.

Who can opt out?

• Sole proprietors and partners with no employees aren't required to cover themselves. They can choose to, but the policy has to name them specifically.
• Corporate officers and directors are covered employees by default. If they own all of the corporation's stock, they can elect to be excluded in writing.
• Employees can never be excluded. An owner who opts out still has to cover everyone else on payroll.

Owners who opt out have no workers' comp benefits if they're hurt on the job, so think about health, disability and life insurance before you decide. A broker can walk through both options with you.

Posting and notice requirements

• Post the notice. Every work site needs the "Notice to Employees" poster in a conspicuous place, showing your insurer and how to get medical care for a work injury (Labor Code 3550). Failing to post it can bring a civil penalty of up to $7,000 per violation. Your insurer supplies the poster.
• Give new hires the pamphlet. Each new employee must receive the state's written explanation of workers' comp rights and benefits.
• Provide a claim form within one working day after you learn an employee was hurt at work.

Penalties for not having workers' comp in California

• Criminal charges: Failing to secure coverage is a misdemeanor punishable by up to one year in county jail, a fine of up to double the premium you should have paid while uninsured (and no less than $10,000), or both (Labor Code 3700.5).
• Stop orders: When the Labor Commissioner finds an employer operating without coverage, it issues a stop order barring the use of employee labor until coverage is in place. Ignoring the order is a separate misdemeanor, with up to 60 days in jail, a fine of up to $10,000, or both.
• State penalty: The Labor Commissioner also assesses the greater of twice the premium you would have paid while uninsured, or $1,500 per employee employed during that time (Labor Code 3722(b)).
• Penalties after a claim: If a workers' comp judge finds you were uninsured when an employee was hurt, you can be assessed $10,000 per employee on payroll if the claim is compensable, or $2,000 per employee if it isn't, up to $100,000 (Labor Code 3722(d)).
• Paying the claim yourself: An uninsured employer is responsible for every medical bill and benefit. The injured worker can also sue you in civil court, because you lose the protection that insured employers have.

When an uninsured employer can't pay, the state's Uninsured Employers Benefit Trust Fund may pay the injured worker and then pursue the employer for reimbursement, including through liens on its property.

What workers' comp costs in California

Premiums are based on payroll and the class code for each type of work: payroll divided by 100, times the rate for your class, times your experience mod. The statewide average advisory rate for policies starting on or after September 1, 2026 is $1.65 per $100 of payroll, but clerical staff cost a fraction of that and caregivers and construction workers cost much more. Our article on how much workers' comp costs in California walks through examples, and you can look up any job in our California class code search.

How to get covered

1. List each employee by job duty and estimate annual payroll for each type of work.
2. Confirm class codes, and keep office-only staff in the clerical class rather than lumping them in with field workers.
3. Compare carriers. Rates vary by insurer, and an independent agent can shop several at once.
4. Decide whether owners or officers are included or excluded, and put any exclusion in writing.
5. Bind coverage before your first hire, post the notice, and keep your certificate of insurance on file. Customers and general contractors will ask for it.

Bliss Marc has placed California workers' comp since 1981. See our California workers' compensation insurance page, or get an instant workers' comp estimate →

Frequently asked questions

Is workers' compensation insurance required in California?

Yes. Every California employer with one or more employees, including part-time employees, must carry workers' compensation insurance or be approved to self-insure (Labor Code 3700).

Do I need workers' comp if I'm a sole proprietor with no employees?

No. A sole proprietor or partnership with no employees isn't required to carry it. You can buy a policy covering yourself, but health and disability insurance are often a better fit.

What is the penalty for not having workers' comp in California?

Going uninsured is a misdemeanor with a fine of at least $10,000, up to a year in jail, or both. The Labor Commissioner can also issue a stop order and assess the greater of twice the unpaid premium or $1,500 per employee.

Can corporate officers opt out of workers' comp in California?

Only if the officers and directors own all of the corporation's stock. In that case they can elect in writing to be excluded. Otherwise officers are covered employees.

How do I prove I have workers' comp coverage?

Ask your insurer for a certificate of insurance. Clients, landlords and general contractors commonly require one before you start work.

This article is general information, not legal advice. For questions about your obligations, contact the California Division of Workers' Compensation or an attorney. Bliss Marc International Corporation is a licensed insurance agency, California License #0H92044.

Sources: California Labor Code sections 3351, 3550, 3700, 3700.5, 3710.1, 3710.2 and 3722; California Department of Industrial Relations, Division of Workers' Compensation employer information; WCIRB and California Insurance Commissioner, September 1, 2026 advisory pure premium rate decision.