MANY SMALL business owners make the mistake of not securing workers’ compensation insurance after they hire their first employee. Some mistakenly believe they need at least five employees before they must secure coverage.
But in California there is no minimum andif you go without coverage and an employee is injured on the job, your firm could be held
liable for all of the medical costs and any lost pay from missing work.
Also, if you are taking on independent contractors and they are primarily working for you, it could be a sign that maybe you should be classifying them as employees. We hope in this article to clear up any confusion you may have about workers’ com- pensation if you are a small employer.
If you are running a business, you are not required to purchase workers’ compensation coverage for yourself. The same holds true if you are a sole proprietor and you work with your spouse in running the business.
In California, workers’ comp is optional where the partners of a partnership (or soleshareholders of a corporation) are the only ones performing work.
There are benefits to being covered under workers’ comp. If either of you were to get injured while working at the store, you could receive benefits to pay for your medical bills and for time off work.
But what if your nephew comes to work for you over the summer? Are you required to cover him for workplace injuries?
Yes! Even though your nephew is family, he is considered your employee. In California, an employee is anyone that you “engage or permit to work.”
As a result, you should treat him in the same way that you would treat someone that you hired through a formal job application process.
In short, California law requires any busi- ness with one or more employees to carry workers’ comp insurance.
There are a number of possible consequences for failing to carry worker’ comp insurance, including: Misdemeanor – Having staff and no workers’ comp insurance is a misdemeanor in California. Fines can be as high as $10,000. Stop orders – If the Division of Labor Standards Enforcement determines your business is operating without workers’compinsurance,itcanissueastop order against your business and prohibit you from using employee labor until insurance is secured.
- Additional fines – The DLSE can impose a penalty of $1,000 per employee on payroll at the time a stop order is issued and served, up to a maximum of $100,000.
- Litigated claims – If one of your employees is injured on the job, you may be assessed further fines up to $10,000 per employee on payroll at the time of injury, with a maximum penalty of $100,000.
- Employer liability – In addition to all the fines and penalties, your business would be liable for all medical costs and bills relating to your employee’s illness or injury if you operate without workers’ compensation insurance.