Workers’ compensation is an insurance structure that has been in place in California since the 1920s. The law itself was first enacted in 1913. The system was designed to act as a tradeoff between employers and employees by giving workers quick access to medical treatment, loss of time from work and permanent impairment resulting from on-the-job injuries and illnesses, regardless of who is at fault, while also protecting California businesses from most lawsuits brought by injured workers.
Under California law, all employers in the state are required to carry workers’ compensation insurance – even if they have only one employee. In fact, even out-of-state employers may need to purchase workers’ comp coverage in California if they have one or more employees who work here regularly, or if they enter into an employment contract in the state.
By providing benefits for most work-related injuries regardless of who is at fault, the California workers’ comp system eliminates the need for lawsuits in most cases. However, the protection from employee lawsuits is not absolute. Workers can still sue their employers directly for injuries resulting from serious and willful misconduct on the part of the employer.
Additionally if an employer takes any action which is detrimental to an employee and unfairly discriminates against that employee who has filed or made known his intention to file a workers’ compensation claim that employer can still be sued for such discrimination under Labor Code section 132(a). If either of these claims is made against an employer it is very important to get help from a reputable workers’ compensation employer defense attorney to help protect the company’s legal and financial interests. Both of these type claims can NOT be covered by any workers’ compensation insurance policy and an adverse finding can dramatically impact the business’s bottom line.
California law requires employers to cover the cost of workers’ compensation insurance. Because it is considered “overhead,” or one of the costs of doing business, employers may not ask employees to purchase their own workers’ comp coverage or require them to help cover the cost of the premiums.
Typically, small business owners in California are not required to have workers’ compensation coverage if they are sole proprietors with no employees. However, it may become necessary to purchase workers’ comp insurance if the business hires one or more employees, even on a temporary basis. Thus, for example, California business owners who hire extra help during the holiday season or other busy times may need to insure those workers through the workers’ compensation system.
Many California businesses choose to fulfill their workers’ compensation obligations by becoming “self insured.” Like all other California employers, self-insured businesses must comply fully with the state’s workers’ compensation laws. However, unlike most companies, which purchase their coverage from third-party insurance providers, self-insured employers take direct responsibility for their own claims.
According to the California Department of Industrial Relations, California has the largest self insurance program for workers’ compensation of any state in the country, with more than 7,200 self-insured employers as of January 2013. Despite the popularity of self insurance in California, however, it does carry certain risks. Therefore, California business owners should seek competent legal advice when considering their options for workers’ compensation.
Not having insurance in place to cover a possible claim for benefits by an injured worker can be very dangerous for an employer. There can be substantial criminal fines and penalties ($10,000.00 – $50,000.00) along with civil fines ($1,500.00 per employee) as well as possible business closure. There are other penalties and loss of civil defenses far too extensive to detail here. If a claim is made against you or your business it should not be treated lightly or as a nuisance and action should be taken swiftly to avoid loss of defenses.
For help understanding their legal rights and obligations under California’s workers’ compensation laws, business owners in California are encouraged to seek advice from a reputable workers’ compensation employer defense attorney.