Workers Comp Frequently Asked Questions:

THE CALIFORNIA WORKERS COMPENSATION SYSTEM

Workers' compensation is the oldest social insurance program; it was adopted in most states, including California, during the second decade of the 20th century. It is a no-fault system, meaning that injured employees need not prove the injury was someone else's fault in order to receive workers' compensation benefits for an on-the-job injury.

The workers' compensation system is premised on a trade-off between employees and employers -- employees are supposed to promptly receive the limited statutory workers' compensation benefits for on-the-job injuries, and in return, the limited workers' compensation benefits are the exclusive remedy for injured employees against their employer, even when the employer negligently caused the injury.

This no-fault structure was designed to -- and in fact did -- eliminate the then prevalent litigation over whether employers were negligent in causing workers' injuries. Litigation is now over other issues, such as whether the injury was sustained on-the-job or how much in benefits an injured worker is entitled to receive.

Q. Do I need to have workers' compensation insurance?

A. California law requires employers to have workers' compensation insurance. Even out-of-state employers may need workers' compensation coverage if an employee is regularly employed in California or a contract of employment is entered into here.

Q. My spouse and I are the sole owners of our business. We have no employees. Are we required to obtain workers' compensation coverage?

A. Generally, if you are the sole owners of the business, coverage for yourselves, is optional if you wish to pursue it. You would need to have workers' compensation coverage for any employees you may hire. You should consult with your attorney, insurance agent or broker, or carrier regarding the specifics of you situation and your options.

Q. Are executive officers or directors of the company covered in its workers' compensation policy?

A. 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 which case they may elect not to be covered. Several sections of the California Labor Code must be considered here. You should consult with your attorney, insurance agent or broker, or your carrier regarding the specifics of your situation.

Q. Where do I get workers' compensation insurance?

A. You can get workers' compensation insurance coverage from any of the more than 300 private licensed insurers authorized to sell such policies in California. Most policies are sold through an insurance agent or broker.

The largest workers' compensation carrier is State Compensation Insurance Fund (State Fund). If you can't find an insurer willing to cover your business, State Fund is required to provide you with coverage.

Q. How much does workers' compensation insurance cost?

A. Workers' compensation insurance premium rates were deregulated several years ago. They may now vary from carrier to carrier. Like any good consumer, you should shop around for a carrier that best meets your needs. Cost is one consideration, but there are other factors you should look at: the services they provide, how convenient will it be to work with them how familiar they are with your industry, etc. If you have a broker or agent, check with that person.

Q. This is a family business and I'd like to pay the doctor cash. Is that OK?

A. No, it is illegal for an employer to pay medical bills directly. You must file a claim form (DWC form 1) with your claims administrator for all injuries that require more than first aid.

Q. What determines our premium?

A. A number of factors go to into determining the annual premium that your insurance carrier will charge. These include: your industry classification; your company's past history of work related injuries (known as your experience modification), your payroll; any special underwriting adjustments, such as use of a certified Health Care Organization; and any special group or dividend programs that you may be eligible for. For further information and advice on how to lower your rates, please contact our office.

Q. Can I be fined for not carrying workers' compensation insurance?

A. Yes. If the Division of Labor Standards Enforcement (State Labor Commissioner) determines that an employer has failed to secure workers' compensation coverage, a stop order will be issued and served (Labor Code Section 371.1). This order prohibits the use of employee labor until the coverage is obtained, and failure to observe it is a misdemeanor punishable by imprisonment in the county jail for up to 60 days or by a fine of up to $10,000, or both. (Labor Code Section 3710.2). The Division of Labor Standards Enforcement will also assess a penalty of $1,000 per employee employed at the time the stop order is issued and served. (Labor Code Section 3722(a)).

In addition, if an injured worker files a workers' compensation claim that goes before the WCAB, (Workers Compensation Appeals Bureau) and the workers' compensation judge finds that the employer had not secured insurance as required by law, then, when the adjudication becomes final, the uninsured employer may be assessed a penalty of $10,000 per employee employed at the time of injury if the worker's case was found to be compensable, or $2,000 per employee employed at the time of injury if the worker's case was noncompensable, up to a maximum of $100,000 (Labor Code Section 3722(b).

Finally, as noted in a previous question, failure to secure workers' compensation insurance when you knew, or reasonably should have known, that it is required, is a misdemeanor "punishable by imprisonment in the county jail for up to one year, or by a fine of up to ten thousand dollars ($10,000) or by both that imprisonment and fine." (Labor Code Section 3700.5)

Q. Can my employees contribute for workers' compensation insurance?

A. No. Workers' compensation insurance is part of the cost of doing business. An employer cannot ask employees to help pay for the insurance premium.

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