Sole Proprietors and Corporations

• Under California law, if you are a sole proprietor, you may purchase workers' compensation insurance. However, if you hire at least one additional employee, even temporarily, you must purchase insurance to cover her from the first day of employment. If you own your business with another owner, you may both opt out of coverage. For corporations, California considers directors, officers and payroll employees as covered workers. Thus, you must purchase insurance coverage if you own your corporation with at least one other director or officer. However, if you are the only corporate director or owner, you do not have to purchase coverage unless you engage in hazardous work such as construction.
  
  

Overview of California System

• California requires you to provide workers' compensation insurance to cover any work-related injuries or conditions regardless of who was at fault. In return for providing those benefits, your employee must waive her right to sue you for damages caused by those injuries. You must purchase your insurance policy through a licensed insurance carrier authorized to provide coverage in California or apply for self-insurance status through the Division of Workers' Compensation. If you are unable to find adequate coverage, you are required to receive coverage from the State Compensation Insurance Fund.
  
  

Self-Insurance

• To receive approval as a self-insured employer, you must have at least a net worth of $5 million, generate net revenues of at least $500,000 annually and provide a security deposit with the state Division of Workers' Compensation. Historically, California typically provided certification to large employers. However, as of 2011, small employers are able to receive approval as a self-insured business and can pool their benefits with other small employers. The Office of Self Insurance Plans, a state agency, can help you find additional information or apply for self-insurance coverage by pooling your funds with other small businesses in the state.
  
  

Filing Claims

• Once an employee notifies you of her injuries, you have five days to submit a California DLSR 5020 Form. However, you have only one day to submit California DWC Form 1 after finding out about your employee's injury or accident. You must report injuries to your insurance carrier and ensure prompt payment of medical benefits. Under the state's system, employees can receive six different types of benefits. These benefits include medical coverage; temporary disability and permanent disability benefits; supplemental job displacement benefits; death benefits; and vocational training benefits.
  
  

Considerations

• Since employment laws can frequently change, do not use this information as a substitute for legal advice. Seek advice through an attorney licensed to practice law in your jurisdiction.