Workers' compensation in California: Guide for contractors

California contractors generally must obtain workers’ compensation coverage as soon as they hire their first full or part-time employee. However, some high-risk contractor classifications like concrete and asbestos abatement require coverage even for solo operators with zero employees. Operating without insurance is a misdemeanor punishable by jail time, high fines, and potential suspension of licenses. But even with insurance, California law gives employers as little as one working day to begin the claims process after an injury.

Because employees may move between jobsites or perform separately classifiable work, workers’ comp requirements can be difficult to manage in California. Payroll records must show where employees worked and exactly what they did because those details can affect premiums and insurance audits. 

This guide explains California workers’ compensation responsibilities, coverage, and exemptions for contractors.

What is workers’ compensation insurance in California?

California workers’ compensation covers injuries and illnesses that happen on the job. For example, a carpenter falls from scaffolding or develops temporary hearing loss from repeated exposure to loud equipment. The insurer pays for authorized medical care and replaces part of the employee’s lost wages. Lasting disabilities like traumatic brain injuries (TBIs) or amputations may qualify for additional benefits.

The California law uses a no-fault system, meaning an employee can generally receive benefits without proving that the contractor acted negligently. In return, workers’ compensation usually serves as the employee’s exclusive remedy. This both protects employers from civil negligence suits while also ensuring employees get medical care quickly.

What is the minimum workers’ comp coverage required in California?

The workers’ compensation side of the policy carries no dollar limit, because California requires the carrier to pay whatever benefits the law provides. Standard employers’ liability limits commonly start at $100,000 per accident. Disease limits commonly start at $100,000 per employee and $500,000 per policy, though contracts may require more.

Who is exempt from workers’ compensation in California?

California bases exemptions on the contractor’s business structure and license classification. Having no employees doesn’t always remove the coverage requirement. 

A contractor generally doesn’t cover a bona fide subcontractor’s employees when that business maintains required coverage. However, an unlicensed or misclassified worker may count as the hiring contractor’s employee. Under California’s construction-specific rules, a 1099 form doesn’t settle the issue. Contractors should confirm the subcontractor’s California Contractors State License Board (CSLB) license and coverage before mobilization.

Here’s who can currently be exempt.

Sole proprietors

A sole proprietor with no employees generally doesn’t need coverage for themselves. However, under SB 216, California currently requires coverage for five contractor classifications regardless of employee count. The rule applies to these licenses:

• C-8 Concrete 
• C-20 HVAC
• C-22 Asbestos Abatement
• C-39 Roofing
• C-61/D-49 Tree Service contractors
  

Other licensed contractors with zero employees can generally file an exemption with the CSLB. But that exemption is disappearing. Under SB 216 and its extension timeline, beginning January 1, 2028, virtually all CSLB licenses will be required to carry a workers’ comp policy regardless of employee count. Before then, CSLB must establish a process for verifying no-employee exemptions by January 1, 2027. This deadline applies to CSLB rather than individual contractors.

Corporate officers and directors

A sole shareholder who serves as a corporate officer or director is automatically excluded unless they elect coverage. Other officers and directors may sign a waiver if they own at least 10% of the company’s stock. An officer with at least 1% ownership may also qualify when a qualifying relative owns at least 10% and the officer has health insurance. The insurer must accept the signed waiver before the exclusion takes effect. 

LLC managing members and general partners

An LLC managing member or general partner may elect exclusion by submitting a written waiver to the insurer. However, LLC membership alone doesn’t exempt a member who works as part of the construction crew.

What California workers’ compensation law requires of employers

The following workers’ comp requirements in California begin with coverage and continue through the claim response.

Obtain CA workers’ comp insurance

Every employer in California with at least one full or part-time employee generally must carry workers’ compensation coverage. This rule also applies to sole proprietors as described above. Employers can buy a policy from an insurer authorized in California or receive approval to self-insure through the Office of Self-Insurance Plans (OSIP).

Operating without required coverage is a misdemeanor punishable by up to one year in county jail. A first conviction can also bring a fine of up to twice the unpaid premium, with a $10,000 minimum. The Department of Industrial Relations (DIR) may issue a stop work order that prevents employees from working until the employer obtains coverage. For licensed contractors, operating uninsured can also lead to license suspension.

Provide the workers’ comp pamphlet

Employers must provide each new hire with a workers’ compensation pamphlet when employment begins or by the end of the first pay period. The pamphlet or notice explains how to report an injury and access benefits. It also covers medical care rights, including when an employee can predesignate a physician. 

Contractors can include the pamphlet in field onboarding so employees receive the information before reporting to a jobsite.

Post the required notice

Employers must display the DWC-7 notice in both English and Spanish where employees can read it during a workday. The notice identifies the carrier or claims administrator. It also explains how employees can report an injury and obtain medical care. This information must travel with the crew between jobsites, with a copy available at every active job location.

Respond within one working day of an injury report

When an injury causes treatment beyond first aid or lost time beyond the current shift, the employer must provide a DWC-1 claim form within one working day. After the employee returns the form, the employer must give the employee a completed copy and forward the claim to the claims administrator.

Within one working day of receiving the workers’ compensation claim, the employer must authorize up to $10,000 in appropriate medical treatment. The employer must also provide transitional work when appropriate.

A different deadline applies to a work-related death or serious injury or illness. The employer must report the incident to Cal/OSHA as soon as practical and no later than eight hours after learning about it.

Maintain an Injury and Illness Prevention Program

Every construction employer must maintain a written Injury and Illness Prevention Program (IIPP). The IIPP explains how the contractor identifies and corrects jobsite hazards. It also addresses employee training and injury investigations.

Construction employers must support the IIPP with a written Code of Safe Practices that reflects their operations. Supervisors must hold toolbox or tailgate meetings at least every 10 working days.

What does workers’ compensation cover in California?

California workers’ compensation provides the following benefits based on the injury’s effects.

Medical treatment

Workers’ comp pays for treatment reasonably required to relieve or cure a work-related injury. Coverage can include emergency care and follow-up appointments, as well as prescriptions or medical equipment.

California law generally caps chiropractic care at 24 visits. Physical therapy has a separate 24-visit cap, as does occupational therapy. The claims administrator may approve additional visits, and some postsurgical treatment falls outside these limits.

Temporary disability (TD) benefits

TD payments generally replace two-thirds of the employee’s average weekly wages, subject to state minimums and maximums. Payments usually begin when a doctor keeps the employee from performing the regular job for more than three days. An overnight hospitalization can also trigger eligibility. 

Benefits stop when the employee returns to work or receives medical clearance. For most injuries, TD can’t exceed 104 weeks within five years of the injury date.

Permanent disability (PD) benefits

An employee may receive PD benefits when an injury causes lasting physical or mental limitations. For example, a serious hand injury may prevent a carpenter from returning to the same duties after treatment ends.

A doctor’s report describes the employee’s impairment. A disability evaluator or the judge uses that information to calculate a percentage rating, which also reflects the employee’s age and occupation. For injuries on or after January 1, 2013, the percentage rating uses a flat 1.4 multiplier added to the medical impairment score rather than future earning capacity.

Supplemental job displacement vouchers

An employee with permanent partial disability may qualify for a Supplemental Job Displacement Benefit (SJDB). This occurs when the employer doesn’t offer qualifying work within 60 days after the claims administrator receives the doctor’s return-to-work report. For injuries on or after January 1, 2013, the benefit provides a $6,000 voucher.

The employee can use the voucher for approved education or retraining. It can also cover licensing fees and required equipment, subject to program limits.

Death benefits

When a work-related injury or illness results in death, a surviving spouse or qualifying dependent may receive death benefits. California bases the amount on the number of eligible dependents and their level of dependency.

Workers’ comp also covers reasonable burial expenses. For injuries that happened on or after January 1, 2013, the burial allowance can provide up to $10,000.

Manage California workers’ comp with Miter

Job classification codes affect workers’ comp costs because each code connects a type of work with a corresponding insurance rate. California contractors may divide payroll between distinct construction classifications when their records support the split. But without adequate records, an insurer may assign payroll to the highest-rated applicable classification.

Employees may perform differently classified work during the same pay period. Miter Payroll lets contractors configure workers’ comp rates by job or employee. Rates can also reflect cost code or state. More specific configurations can use pay rate or job-plus-cost-code combinations.

Miter Job Costing then links those insurance expenses directly to the relevant job, phase, and cost code where the work happens. Because insurance costs scale with employee wages, the software automatically calculates these premiums per task rather than lumping them into a generic overhead pool. This ensures every project absorbs its exact insurance burden, providing a true picture of fully burdened labor costs and clean, verifiable records for insurance audits.