Workers' Comp for California Contractors — Mandatory. No Exceptions.
California Labor Code §3700 requires workers' comp for every contractor with one or more employees. AB 5 reclassification, Cal/OSHA's construction-focused enforcement, and EMR-driven pre-qualification make proper coverage essential to operating — and bidding — in California.
California's Regulatory Landscape
California's workers' compensation system is among the most complex and strictly enforced in the nation. Understanding these requirements isn't optional — it's the cost of doing business.
Mandatory Coverage — No Exceptions
California Labor Code §3700 requires workers' comp for every employer with one or more employees — including part-time, seasonal, and family members receiving wages. Cal/OSHA inspectors actively audit job sites. Contractors caught without coverage face immediate stop-work orders, penalties up to $100,000, and misdemeanor criminal charges under LC §3700.5.
AB 5 Worker Classification
California's AB 5 (codifying Dynamex) applies the ABC test to determine employee vs. independent contractor status. Most construction workers default to employee classification unless all three prongs are met. Misclassification exposes contractors to back-premium assessments, EDD penalties, and uninsured employer liability for any injuries sustained.
EMR & Premium Impact
Your Experience Modification Rate directly controls premium costs. California's WCIRB calculates EMR based on 3 years of loss history vs. industry expected losses. An EMR of 1.20 means you pay 20% more than average. Many GCs won't sub to contractors with EMR above 1.0, and vendor pre-qualification platforms (Avetta, ISNetworld) flag elevated EMRs automatically.
Cal/OSHA Construction Focus
Cal/OSHA's Targeted Inspection and Consultation Program (TIC) prioritizes construction sites. California's IIPP (Injury & Illness Prevention Program) requirement is unique nationally — every employer must have a written safety program. Failure to maintain an IIPP triggers Cal/OSHA citations that compound workers' comp exposure and EMR deterioration.
What California Workers' Comp Covers
Workers' compensation provides the exclusive remedy for workplace injuries — employees receive guaranteed benefits, and employers receive liability protection. California's benefit structure is among the most generous nationally.
- Medical benefits — all treatment for work-related injuries including ER, surgery, PT, prescriptions
- Temporary disability — wage replacement at 2/3 of average weekly earnings during recovery
- Permanent disability — rated impairment benefits for lasting injuries based on AMA guidelines
- Supplemental Job Displacement Benefit (SJDB) — vouchers for retraining if unable to return to prior duties
- Death benefits — payments to surviving dependents plus burial expenses up to $10,000
- Employer's liability — Part B coverage for third-party-over actions and dual-capacity claims
- Legal defense — carrier-funded defense for contested claims and WCAB hearings
- Return-to-work programs — modified duty and transitional work arrangements
Real-World Claim Scenario
Irvine Framing Contractor
A journeyman carpenter fell from a ladder while installing crown molding in a custom home. Fractured two vertebrae. Required spinal fusion surgery, followed by eight months of physical therapy and wage replacement.
The contractor's workers' comp policy covered every dollar. Without coverage, the employer would have faced personal liability exceeding $180,000 — plus Cal/OSHA penalties and potential criminal charges for operating uninsured.
Total Claim: $182,000+
- • Spinal fusion surgery: $95,000
- • Physical therapy (8 months): $24,000
- • Temporary disability wages: $38,000
- • Permanent partial disability: $18,000
- • Medical equipment & follow-up: $7,000
Proper workers' comp coverage protected the employer from personal liability and kept the business operating.
Workers' Comp Resource Library
In-depth guides covering EMR management, premium audits, safety programs, and California-specific workers' comp requirements.
California Workers' Comp FAQ
How much does workers' comp cost for California contractors?
Rates vary by trade classification. Carpentry (NCCI 5403) runs roughly $12-18 per $100 of payroll. Roofing (5551) ranges $25-40. Electrical (5190) sits around $6-10. Your EMR multiplies against these base rates — a 0.85 EMR saves 15%, while a 1.25 EMR adds 25%. Payroll size, claims history, and safety programs all factor in. We shop 50+ carriers to find the most competitive rate for your specific classification.
What happens if I misclassify workers under AB 5?
If Cal/OSHA or the EDD determines your 'independent contractors' are actually employees under the ABC test, you'll face retroactive premium assessments covering all misclassified workers, EDD penalties for unpaid payroll taxes, and uninsured employer liability if any worker was injured. The penalties compound quickly — a crew of 5 misclassified framers over 2 years can generate $200,000+ in back assessments and fines.
Can sole proprietors opt out of workers' comp in California?
Sole proprietors and certain LLC members/partners can elect to exclude themselves from workers' comp requirements. However, most GCs and project owners contractually require coverage from everyone on site. Without coverage, you're personally liable for your own medical costs if injured on the job, and you may lose bid opportunities. The cost of covering yourself is often less than $100/month.
How does EMR affect my ability to bid work?
Many California GCs set EMR thresholds at 1.0 or lower for subcontractor pre-qualification. Vendor management platforms like Avetta, ISNetworld, and myCOI automatically flag contractors with elevated EMRs. An EMR above 1.25 can effectively disqualify you from most commercial and institutional work. We help contractors implement loss control programs to drive EMR down over the 3-year experience period.
What is California's IIPP requirement?
California requires every employer to maintain a written Injury & Illness Prevention Program (IIPP) per Title 8 §3203. This must include hazard identification, accident investigation procedures, employee training records, and a system for communication about safety. Cal/OSHA cites IIPP violations more than any other standard. A compliant IIPP also helps control your workers' comp claims and EMR.
Get California Workers' Comp That Fits Your Trade
We shop 50+ A-rated carriers to find the most competitive workers' comp rates for your specific trade classification, payroll, and EMR. Same-day certificates available.