Frequently those contemplating hiring employees ask whether they must obtain and pay for worker’s compensation insurance (sometimes referred to as “worker’s comp”) for their employees. Those same people sometimes believe that they do not need to obtain worker’s comp, or that they may be able to skate by without it, hoping that they will never suffer the consequences for failing to do so. They also sometimes believe that even if they do eventually get caught, all they will owe is the unpaid premiums. These folks are wrong and could be setting themselves up for significant penalties.

First, California Labor Code Section 3700 provides:“

Every employer except the state shall secure the payment of compensation in one or more of the following ways: (a) By being insured against liability to pay compensation by one or more insurers duly authorized to write compensation insurance in this state. (b) By securing from the Director of Industrial Relations a certificate of consent to self-insure either as an individual employer, or as one employer in a group of employers, which may be given upon furnishing proof satisfactory to the Director of Industrial Relations of ability to self-insure and to pay any compensation that may become due to his or her employees.” Id. [Emphasis added.]

California law, therefore, requires all California employers to obtain worker’s compensation insurance for their employees. For those believing they can hire employees and never obtain worker’s comp insurance, the stark fact is that, if caught, California law provides for their criminal prosecution. California Labor Code Section 3700.5 provides:

“(a) The failure to secure the payment of compensation as required by this article by one who knew, or because of his or her knowledge or experience should be reasonably expected to have known, of the obligation to secure the payment of compensation, is a misdemeanor punishable by imprisonment in the county jail for up to one year, or by a fine of up to double the amount of premium, as determined by the court, that would otherwise have been due to secure the payment of compensation during the time compensation was not secured, but not less than ten thousand dollars ($10,000), or by both that imprisonment and fine.”

For a second or subsequent conviction of a violation of Labor Code Section 3700, the penalty goes up to triple the amount that would otherwise have been due, together with a fine of no less than $50,000.00.As can be gleaned from a cursory review of California Labor Code Sections 3700 and 3700.5, an employer’s obligation to obtain worker’s comp insurance is an obligation to be taken very seriously. The failure to do so, for any reason, simply is not worth it.

To understand the laws, rules and regulations which will enable you to make informed decisions about your company, and how best to do business in California, you need the services of an attorney uniquely qualified to give you that advice. Michael Leonard, Esq. of San Diego Corporate Law, named “Best of the Bar” for 2016 by the San Diego Business Journal, is that attorney. To schedule a consultation with Mr. Leonard to discuss any business-related matter, you can contact him by visiting San Diego Corporate Law or by telephone at (858) 483‑9200.