Workers’ compensation insurance is designed to provide wage replacement and medical benefits to employees of a company who are injured while on the job. These benefits are provided to employees in exchange for removing their right to sue their employer for the injury (with some exceptions, such as injury caused by intentional misconduct of the employer).
In California, all businesses with at least one employee must provide workers’ compensation insurance to their employees, and this benefit must not be subsidized by the employees. Executive officers and directors of corporations must be included in a company’s workers’ compensation coverage, unless the corporation is fully owned by the directors and officers. In that case, those owner-directors and owner-officers may elect to be excluded from workers’ compensation coverage.
Because workers’ compensation insurance is such a common requirement—all businesses with at least one employee must provide this benefit—it is important for all business owners to figure out the answers to some basic questions in this sector. For instance, an important early decision is determining whether to buy workers’ compensation insurance to cover yourself in the case of an accident, even before you hire any employees. It’s also important to know where to buy worker’s compensation insurance.
Should Sole Proprietors Buy Workers’ Compensation Insurance for Themselves?
A sole owner of a business may want to purchase workers’ compensation insurance to cover their own injuries in case of an accident, even before they hire any employees. While this is not required (as you don’t need to provide workers’ compensation insurance until you employ at least one employee who is not an owner), it’s certainly an option, and it’s something you can discuss with your insurance broker.
However, because workers’ compensation insurance is a liability insurance in which the employer is assuming the liability for its employees’ injuries, this particular kind of insurance may not be the best choice for a sole proprietor. Your insurance broker may suggest purchasing a combination of health insurance, life insurance, and disability insurance to cover a variety of unexpected situations—work-related or not.
Purchasing Workers’ Compensation Insurance for Your Business
Workers’ compensation insurance can be purchased from a licensed insurance company (if you’re using an insurance broker, this is likely what you’re purchasing) or from the State Compensation Insurance Fund (or the “State Fund”). Businesses that meet the net worth and net income requirements can also self-insure with state approval, something many larger employers take advantage of. Smaller businesses that don’t meet the worth and income requirements may be able to join a self-insurance group with other small employers in their industry.
Your insurance broker or the State Fund can help you determine the best option for your business’s insurance. How much this insurance will cost will depend on the type of business you own, the number of employees your business has, and your business’s past history of accidents. There may also be other adjustments based on special considerations that relate to your specific company.
Once you’ve purchased your insurance, you’ll be required to post certain “notices to employees” at your work site. These are posters that inform employees of their federal and state rights, the benefits to which they are entitled, and how they can report any problems in the workplace to the appropriate authority. New hires should also be provided with a workers’ compensation pamphlet as part of your on-boarding process that outlines what workers’ compensation insurance is and the coverage you provide.
If you’d like more help understanding workers’ compensation insurance and how the legal requirements governing it may affect your company, contact the team at Chase Law Group, P.C. by giving us a call at (310) 545-7700. We can help make sure you’re in full compliance with California law by guiding you along every step, from understanding the requirements to drafting the notices to your employees.