Workers’ compensation insurance provides financial and medical benefits to employees injured on the job. In California, nearly all employers are required to carry this insurance. However, not everyone working in the state is covered. Some individuals and job roles are exempt from mandatory workers’ compensation coverage. Understanding these exemptions is important for both employers and workers to avoid potential legal and financial issues.
Independent Contractors
Independent contractors are not considered employees under California law and are generally not eligible for workers’ compensation benefits. These individuals work for themselves and are responsible for their own insurance. However, misclassification is a common issue. Some employers wrongly label workers as independent contractors to avoid providing benefits. California uses the “ABC Test” to determine if a worker is truly an independent contractor. If the worker does not meet all three conditions of the test, they may be legally classified as an employee and entitled to workers’ compensation.
Sole Proprietors and Business Partners
Sole proprietors and partners in a business are typically exempt from mandatory workers’ compensation coverage. Since they are not considered employees of their own business, they are not required to be covered unless they voluntarily choose to purchase a policy. This is common in industries where physical labor is involved, as a work injury could lead to significant medical expenses and lost income.
Executive Officers and Directors
Certain corporate executives, officers, and directors may be exempt from workers’ compensation requirements. If a corporation is fully owned by a few individuals who also serve as officers and directors, they may opt out of coverage. However, this exemption does not apply if they are actively working in a non-administrative role within the company. Employees working under their supervision must still be covered.
Family Members in a Family-Owned Business
In some cases, family members working for a family-owned business may not be required to have workers’ compensation coverage. The rules vary depending on the business structure. A sole proprietor can exclude family members from coverage, while a corporation may be required to provide insurance regardless of familial relationships. Employers should verify their obligations to avoid penalties.
Domestic Workers
Housekeepers, nannies, and caregivers who work in private homes may be exempt from workers’ compensation coverage under certain conditions. In California, an employer is not required to provide coverage if the domestic worker works less than 52 hours or earns less than $100 in a 90-day period. However, once these thresholds are met, the employer must provide workers’ compensation insurance.
Agricultural Workers
Most agricultural workers in California are covered under workers’ compensation laws, but there are some exceptions. Farms with fewer than five employees working in a calendar year may not be required to provide coverage. Additionally, temporary or seasonal agricultural workers may face exclusions depending on the nature of their employment and the size of the farm.
Volunteers
Volunteers typically do not qualify for workers’ compensation because they are not paid employees. However, some nonprofit organizations and government agencies may choose to provide coverage for volunteers. Certain roles, such as volunteer firefighters, may have specific laws that grant them benefits under workers’ compensation statutes.
Real Estate Agents and Other Licensed Professionals
Certain licensed professionals, such as real estate agents and insurance brokers, are often classified as independent contractors under California law. As a result, they are not entitled to workers’ compensation benefits. However, this depends on their employment agreement and whether they operate under a brokerage or independently.
Members of Limited Liability Companies (LLCs)
LLC members who actively work in the business may not be required to carry workers’ compensation insurance for themselves. However, if the LLC has employees, the company must provide coverage for those workers. Business owners should carefully assess their classification to determine if they need coverage.
Need Help? Call Hinden & Breslavsky
Understanding who is exempt from workers’ compensation insurance in California can help businesses comply with state laws and ensure workers receive the benefits they are entitled to. Employers should carefully evaluate their workforce classifications to avoid misclassification issues that could lead to legal consequences.
If you are unsure about your workers’ compensation coverage or believe you have been misclassified, contact the Law Offices of Hinden & Breslavsky, APC at (323) 954-1800. Our experienced attorneys can help you understand your rights and obligations under California law.