An overview of the workers’ comp rules for out-of-state employers

Like in-state employers, out-of-state employers are required to provide workers’ compensation coverage for their workers in California.

Each year, numerous people suffer serious and fatal injuries on the job. In fact, the Bureau of Labor Statistics reports there were 334 occupational fatalities in California in 2014 alone. When workplace accidents occur, employees may be entitled to workers' compensation benefits. Employers throughout the state, as well as out-of-state employers, are required to provide this type of coverage. Failing to do so could carry costly consequences.

What is workers' compensation?

Worker's compensation is a social insurance program that is based on a trade-off between employers and employees. In exchange for receiving prompt medical treatment in the event they are injured on-the-job, workers cannot file lawsuits against their employers over those injuries. According to the California Department of Industrial Relations, the benefits offered through the workers' compensation system include medical care, disability benefits, supplemental job displacement benefits and death benefits.

What are the coverage requirements for out-of-state employers?

All employers who have workers in the state of California are required by state law to have workers' compensation coverage. This is generally the case, even if an employer is employing family members or has only one worker. Out-of-state employers are also required to have workers' compensation insurance if they enter into an employment contract in the state, according to the California Department of Industrial Relations. Additionally, employers who are not based in the state must also have this type of coverage if they have an employee who regularly works in California.

What are the penalties for failing to maintain coverage?

In the event an employer neglects to obtain workers' compensation coverage, it could lead to costly consequences. The California Department of Industrial Relations points out that employers may have to pay a penalty of $1,500 per employee for failing to have worker's compensation insurance. Alternatively, they may be required to pay two times the amount they would have paid in premiums for this coverage over the period that they were not insured. In addition to these monetary penalties, employers will be ordered to stop using employee labor until they have obtained workers' compensation coverage. In addition to these civil penalties there are criminal penalties since it is a crime in the state not to have workers' compensation insurance in place with a first time fine of $10,000 and imprisonment for up to one year. In addition there is a 10% increase on all benefits plus the liability to pay for the attorney for the injured employee.

Consulting with an attorney

Navigating the workers' compensation system may be complicated for some employers who employ workers in the state of California. Further, the effects of not being in compliance with these requirements may have an adverse effect on business' operations and bottom line. Thus, it may benefit employers to seek legal counsel. An attorney may help them understand how the laws apply to them and their situations and what they need to do to protect themselves and their employees.