All California employers must provide Workers’ Compensation benefits to their employees under California Labor Code Section 3700. If a business employs one or more employees, then it must satisfy the requirement of the law.

Workers’ Compensation insurance protects employers from liability for on-the-job injuries resulting in employee disability or death. Workers’ Compensation insurance is considered the exclusive remedy for injured employees. What this means is that an employer assumes absolute liability for all workers' injuries and the Workers’ Compensation benefits are the remedy and sole source of funds for the injured workers. An injured employee covered under Workers’ Compensation cannot sue his/her employer for damages.

Failing to have Workers' Compensation coverage is a criminal offense. Section 3700.5 of the California Labor Code makes it a misdemeanor punishable by either a fine of up to $10,000 or imprisonment in the county jail for up to one year, or both. Additionally, the state issues penalties of up to $100,000 against illegally uninsured employers.

If an employee gets hurt or sick because of work and you are not insured, you are responsible for paying all bills related to the injury or illness. You should be aware that Workers’ Compensation benefits are the only exclusive remedy for injuries suffered on the job when you are properly insured. If you are illegally uninsured and an employee gets sick or hurt because of work, that employee can file a civil action against you in addition to filing a Workers’ Compensation claim.

Although some attorneys want Workers’ Compensation insurance coverage for themselves, many elect to opt out. Depending on your status, you may need to opt in to receive coverage. Sole-proprietors are generally not covered by Workers’ Compensation insurance. The inclusion of a sole-proprietor must be clearly stated in the policy or must be added as a coverage endorsement to the policy.

Generally, all employees of the company, as legally defined, including corporate officers and directors, must be included in the policy unless they are the sole owners of the firm. In the case of sole owners, they may elect not to be covered. Several sections of the California Labor Code must be considered to answer this question. You should consult with your attorney, insurance agent or broker, or your carrier regarding the specifics of your situation.