Worker's compensation laws have been adopted in every state and are governed by each state's laws. The purpose of "workers' comp insurance," as it is commonly referred to, is to simplify the issues surrounding workplace injuries by providing a trade-off between employers and employees. Employers insure each employee, giving them access to reliable medical relief for job-related injuries. In turn, such employees are prevented from suing their employers, giving the employer certainty and peace of mind about their potential liability. On paper, the exchange sounds very clear. However, despite a long history and good intentions, this area of law remains very complex.
Countless statutory changes and case law updates have consistently increased the murkiness surrounding Worker's Compensation. This trend seems poised to continue in 2023, as the CA Legislature has adopted new rules that are crucial for employers and employees to understand. It is important to understand the purpose behind these laws to fully appreciate these changes and the value that professional guidance can offer when Worker's Compensation issues arise.
Do Businesses Need Worker's Compensation Insurance?
Worker's comp requirements are determined by and regulated by each individual state. However, to put it simply, all businesses should expect to need worker's comp insurance to provide broad coverage to employers and employees. For those asking, "Do I need workers' comp insurance for 1 employee?" you might be surprised that the answer is almost always: yes. Generally, under California Labor Code, Section 3700, any business that has at least one employee must have worker's compensation insurance. That prompts the question - who is an employee? And further, "Who can be excluded from Worker's Compensation in California?"
California seeks to be generously inclusive with respect to covering individuals based on their status as employees. Under Labor Code Section 3351, the definition of employee is purposefully broad - including those who are employed both lawfully and unlawfully. Business owners should start with the assumption that anyone on their payroll is considered an employee and should speak with an experienced attorney if they think an exemption could apply. Generally, even corporate officers and directors must be included - unless they wholly own the entity and elect to exclude themselves. The intention to be over-inclusive, rather than under-inclusive, has been present since the early days of Worker's Compensation and continues to expand. Senate Bill 216, effective January 2023, effectively includes even more persons as covered employees, and, in 2026, requires all contractors - even the self-employed - to have coverage.
Why is Workers' Compensation Compliance Important?
Workers' Comp is meant to provide a fair exchange between employers and employees. California Employees are entitled to receive prompt, effective medical treatment for on-the-job injuries or illnesses, no matter who is at fault, and, in turn, cannot sue their employers over those injuries. California adopted worker's comp statutes in the early 20th century and continues to take the obligation to facilitate this exchange very seriously. The workers' compensation system only works if each employer maintains the required coverage. So, if employers fail to meet their responsibilities, they are effectively passing those costs to the State of California, or even the Federal Government, potentially. Therefore, significant consequences are in place to deter noncompliance.
For example, employers are required to provide appropriate notice and information to employees about their coverage, usually by signage in the workplace and a pamphlet issued to all new employees. Failure to provide such information can result in civil penalties of up to $7,000 per violation and misdemeanor charges. If you have more than one employee, the failure to provide notice to all employees will result in multiple violations and fines.
Employers who fail to insure their employees can be subject to criminal and civil prosecution. Consequences for failing to insure an employee who sustains a work injury can range from a misdemeanor offense punishable by either a fine of no less than $10,000 or up to one year of county jail time, or both. Additionally, the state of California may issue penalties of up to $100,000 to employers who are illegally uninsured.
Understanding Benefits and Costs
Detailing the full schedule of benefits available to employees would require a much lengthier publication. However, benefits generally include medical care, physical therapy, lost wages, temporary disability benefits, permanent disability benefits, supplemental job displacement benefits and a return-to-work supplement, and death benefits. Additionally, as mentioned above, employees do not have to show who was at fault for the injury, only that the injury occurred while performing work-related duties. By utilizing the workers' comp system, the employee can obtain care and/or benefits more quickly than they would by filing a lawsuit.
As mentioned above, this area of law, though meant to simplify worker and employer relations, is anything but simple. If you need help navigating the complexities of California's Workers' Compensation Insurance laws, contact Krogh & Decker today. Our experienced attorneys can provide the guidance and support you need to protect yourself, your business, and employees.