If you're a construction business owner or contractor in California, you must have a good understanding of workers' compensation insurance. Workers' comp helps protect both you and your employees in case of work-related injuries or illnesses. Below, we'll cover who needs workers' comp, recent changes to requirements, and everything else you need to know about workers' comp for construction workers in California.
Who Needs Workers' Comp in California?
In California, almost every employer is required to carry workers' compensation insurance. This includes construction companies, regardless of the size of the business. If you have one or more employees, you need to have workers' comp insurance. This coverage ensures that if an employee is injured or falls ill due to their work, their medical expenses and lost wages are covered.
Are You Required to Carry Workers’ Comp for Independent Contractors?
In the construction industry, it's common to hire independent contractors. While you are not typically required to cover independent contractors for workers’ comp—since they are self-employed—the contractor may actually be considered an employee under the ABC test.
Recent Changes to Workers’ Compensation Insurance Requirements: Senate Bill 216
The California legislature passed Senate Bill 216, which affects workers' comp requirements in the construction industry. This bill requires that all licensed contractors in California carry workers' compensation insurance, regardless of whether they have employees. This change aims to ensure that all workers on construction sites have access to workers' comp benefits if they get injured on the job.
The first phase, effective since January 2023, applies to the following license classifications:
- Concrete contractors, C-8
- Tree service contractors, D-49
- Heating, ventilation and air conditioning contractors (HVAC), C-20
- Asbestos abatement contractors, C-22
The second phase of SB 216 takes effect on January 1, 2026 and will apply to all remaining licensed contractors.
Do I Need Workers’ Compensation Insurance If I Don’t Have Employees?
Even if you don't have any employees, Senate Bill 216 requires that you carry workers' comp insurance if you're a licensed contractor. This might seem unnecessary if you're a solo operator, but it provides several benefits:
- Protection for Yourself: If you get injured on the job, workers' comp can help cover your medical expenses and lost wages.
- Compliance with the Law: Avoid penalties and legal issues by complying with state regulations.
- Business Opportunities: Many clients and contractors prefer to work with businesses that have proper insurance coverage, as it shows professionalism and responsibility.
Consequences For Noncompliance
Failing to carry workers' compensation insurance in California can have serious consequences. Here are some of the potential penalties and risks:
Financial Penalties
California imposes significant fines on businesses that don't carry workers' comp insurance. These penalties can add up quickly and severely impact your business's financial health.
Legal Issues
Noncompliance can lead to legal problems, including lawsuits from injured workers. Without workers' comp insurance, you could be responsible for paying all medical expenses and lost wages out of pocket.
Stop Work Orders
The state can issue a stop-work order, shutting down your business operations until you obtain the required insurance. This can lead to delays and loss of income.
Damage to Reputation
Noncompliance can harm your business's reputation. Clients and other contractors may be reluctant to work with you if they know you're not following legal requirements.
How Much is Workers’ Comp in California?
The cost of workers' comp insurance in California varies based on several factors, including the nature of your work, the number of employees, and your claims history. Here's a closer look at what influences the cost:
Classification Codes
Workers' comp premiums are based on classification codes that reflect the type of work your employees do. In construction, higher-risk jobs like roofing or heavy equipment operation typically have higher premiums than lower-risk jobs like administrative work.
Payroll Amount
Your total payroll also affects your workers' comp premiums. Generally, the more employees you have and the higher their wages, the higher your premiums will be.
Experience Modification Rate (EMR)
Your EMR is a factor that adjusts your premiums based on your claims history. A lower EMR, indicating fewer claims, can result in lower premiums, while a higher EMR can increase your costs.
Average Costs
On average, construction companies in California can expect to pay between $2.00 and $8.00 per $100 of payroll for workers' comp insurance. However, these rates can vary significantly based on the factors mentioned above.
FAQs: Workers' Comp for Construction Workers in CA
Do all construction workers need workers' comp insurance?
Yes, all construction workers in California need workers' comp insurance, whether they're employees or independent contractors, due to recent legislative changes.
How do I know if my independent contractors need workers' comp coverage?
If your contractors work under your supervision and control, they might be considered employees for workers' comp purposes. Senate Bill 216 requires all licensed contractors to carry workers' comp insurance. If you do end up working with independent contractors who are not under your supervision and control then you should verify and collect proof of coverage from them. Your carrier’s may request this during the audit process and if you are not able to provide proof of insurance for your subs/independent contractor’s then they may pass that exposure and premiums onto you.
What happens if I don't have workers' comp insurance?
Noncompliance can result in financial penalties, legal issues, stop-work orders, damage to your business reputation, not to mention losing your contractor’s license.
How is the cost of workers' comp insurance determined?
Costs are based on classification codes, payroll amount, and your experience modification rate (EMR). Higher-risk jobs and larger payrolls generally result in higher premiums.
Can I deduct workers' comp premiums from my taxes?
Yes, workers' comp premiums are generally tax-deductible as a business expense. Consult with a tax professional for specific advice.
What benefits does workers' comp provide?
Workers' comp covers medical expenses, lost wages, rehabilitation costs, and death benefits for work-related injuries and illnesses.
Can I self-insure for workers' comp?
Large companies with significant financial resources might have the option to self-insure. However, most small businesses are required to purchase workers' comp insurance from an approved provider.
How do I choose a workers' comp insurance provider?
Look for providers with experience in the construction industry, good customer service, and competitive rates. Comparing quotes from multiple providers can help you find the best option.
What should I do if a construction worker is injured?
Ensure the employee receives immediate medical attention, report the injury to your workers' comp insurance provider, and follow up to ensure the claim is processed promptly.
Can workers' comp insurance help me attract clients?
Yes, having workers' comp insurance can enhance your reputation and show clients that you operate professionally and responsibly.
Conclusion: Workers Compensation Insurance For Contractors
Workers' comp insurance is essential for construction workers and contractors in California. Not only is it required by law, but it also provides crucial protection for your business and employees. With recent changes like Senate Bill 216, even solo contractors must carry workers' comp insurance.
Contact JVRC Insurance today and we’ll help you determine your workers’ comp coverage needs and happily provide a free quote.