Types of Businesses That Are Required to Carry Workers' Compensation in California
- As long as a company has no employees, hires only independent contractors or its principals or owners work as independent contractors, no worker's compensation insurance is required. If the company engages in the construction trade of roofing, however, regardless of whether it has employees, it must maintain worker's compensation insurance under California law.
- Any business, regardless of its size, if it has at least one employee, must provide worker's compensation coverage for that employee. In California, there are three options to providing worker's compensation coverage -- buying standard workers' comp insurance, self-insured and self-administered, or self-insured and third party administered.
- With one of the most active self-insurance plans in the nation with over 7,000 companies and public entities electing self-insurance of worker's compensation, California sets strict guidelines for meeting the requirements of self-insurance. Companies that want self-insurance must have at least $5 million in shareholder's equity, must have a completed independent audit and certified financial statements and must have $500,000 in net profits per year for five years. Another option includes group self-insurance of non-affiliated companies -- for both public and private-sector entities. Self-insured entities must provide a security deposit upon application acceptance for self-insurance and must meet specific annual reporting requirements.
- After obtaining a self-insurance application and approval from the Self-Insurance Plans (SIP) division of the state's Department of Industrial Relations and Division of Workers Compensation, the self-insured entity files an annual report with the state. This report lists all claims paid in the fiscal or calendar year, both indemnity and medical, the number of employees and wages by location, a listing of all open indemnity claims and a monetary calculation of the value of all future indemnity claims -- which is used to determine the funds set aside for mitigating these claims.
- Business entities seeking self-insurance in California must have at least one person on staff who has passed the state-mandated and state-monitored self-insurance administrator's examination certification. This standard also applies to third-party administrators who handle claims administration on behalf of a self-insured entity.