If you own a business in California or work as an independent contractor, you’ve probably heard of workers’ compensation insurance. It’s a type of insurance that helps cover medical costs and lost wages when an employee gets hurt on the job. In California, most employers are required by law to carry this insurance. But the rules are not the same for everyone. Some people and businesses are exempt from this requirement.
So the big question is: Who is exempt from workers’ compensation in California? This article will answer that in simple, easy-to-understand language. We’ll look at the types of workers and employers who don’t need to carry workers’ comp, why they’re exempt, and what it all means for your business or work.
Let’s dive in and clear up the confusion.
What Is Workers’ Compensation?
Before we go into who’s exempt, let’s briefly explain what workers’ compensation is.
Workers’ compensation (also called “workers’ comp”) is an insurance policy that pays for medical treatment, disability benefits, and lost wages when an employee is injured or becomes sick on the job. It also helps protect employers from being sued by injured workers.
In California, all employers with at least one employee must carry workers’ comp insurance. Even if you only have one part-time worker, you are legally required to have it. If you don’t, you could face serious fines, penalties, or even criminal charges.
But there are some exceptions.
Who Is Not Required to Have Workers’ Comp in California?
Let’s take a closer look at the main groups of people who are exempt from having or being covered by workers’ comp in California. These are people or business setups that don’t legally need to carry it or don’t qualify for it.
1. Sole Proprietors Without Employees
If you’re a sole proprietor (someone who runs a business by themselves) and you don’t have any employees, you are not required to carry workers’ comp insurance in California.
That means if you’re a self-employed person doing all the work on your own, the state does not force you to buy this insurance.
However, you can choose to buy workers’ comp insurance for yourself. This is called “electing coverage.” It might be a good idea if your work is risky, like roofing, plumbing, or landscaping. If you get hurt, the policy would help cover your medical bills and lost wages.
2. Independent Contractors
Independent contractors are usually not covered under workers’ compensation. These are people who work for a business but are not considered employees. They control how and when they do their work, and they usually provide their own tools.
In California, the rules around independent contractors are strict. The state uses a legal test called the ABC test to decide if someone is a contractor or an employee. If the worker meets all parts of the test, they’re considered a contractor and do not have to be covered under workers’ comp.
But if a business misclassifies an employee as a contractor just to avoid paying for insurance, the business can get into legal trouble.
So, to sum it up: true independent contractors are exempt from workers’ comp coverage. But if the contractor is really working like an employee, they should be covered.
3. Officers and Directors of a Corporation (Sometimes)
In some cases, corporate officers and directors who own part of the company can be exempt from workers’ comp insurance.
Here’s how it works:
If a corporation has no employees other than the corporate officers who own the company, those officers can choose to exempt themselves from workers’ comp. But they must own at least 10% of the company and file a waiver with the insurance company or the state.
This is common in small family-run businesses or closely held corporations. For example, if a husband and wife co-own a business as a corporation and they’re the only workers, they might choose not to carry workers’ comp for themselves.
But once they hire outside employees, they must provide coverage for those workers—even if they themselves remain exempt.
4. Certain Members of an LLC
Limited Liability Companies (LLCs) can also have exemptions under certain conditions.
If the LLC has no employees and is run only by its managing members, those members can usually opt out of workers’ comp coverage—if they meet ownership rules. Like with corporations, they may need to file a form or waiver to make it official.
However, if the LLC hires employees who are not owners, then workers’ comp becomes required.
5. Domestic Workers (In Some Cases)
People who work in someone’s home—like housekeepers, babysitters, or gardeners—are called domestic workers. In California, the law is a bit flexible here.
If you hire a domestic worker for less than 52 hours in a 90-day period, and you pay them less than $100 during that time, you may not be required to provide workers’ comp.
But if you hire a nanny or housekeeper regularly, and you pay them more than that, then yes—you’ll need to get a workers’ comp policy for them.
Also, live-in employees and caregivers are often covered under separate rules, so it’s important to check the exact situation.
6. Volunteers
Volunteers are usually exempt from workers’ comp in California, since they are not paid employees. That means if someone is helping out at a nonprofit or community event without getting paid, the organization doesn’t have to provide coverage.
However, some nonprofits choose to cover volunteers anyway, just to be safe. It’s optional, but it can protect the group from legal or medical issues if something goes wrong.
There are a few exceptions, though. Certain types of volunteers—like volunteer firefighters or police reserve officers—may be covered under special laws.
7. Family Members Working for the Business
If you own a small business and your spouse or children help out, you might wonder if they need to be covered by workers’ comp.
In California, if they are paid employees, then yes—they usually need to be covered, even if they’re family. But if they are unpaid helpers, they may be exempt.
Again, the key point is whether or not they are being paid as employees. If they are on the payroll, they should be covered under a workers’ comp policy.
Why Does It Matter If You’re Exempt?
Knowing whether or not you’re exempt from workers’ comp is important because the law is strict. If you’re required to carry insurance and you don’t have it, you could face:
Fines of up to $100,000
Criminal charges
Stop-work orders from the state
Lawsuits from injured employees
On the other hand, if you’re truly exempt, you can save money by not buying a policy you don’t need. Just make sure your situation fits one of the legal exemptions listed above.
What If You’re Not Sure Whether You’re Exempt?
This is a common problem. California’s laws can be tricky, and one small detail can make a big difference.
If you’re not sure whether you need workers’ comp insurance or if you qualify for an exemption, it’s best to:
Talk to an insurance agent. A licensed agent who knows California rules can give you clear guidance.
Check with the California Division of Workers’ Compensation (DWC). They can provide up-to-date information and help you understand the law.
Speak to a business lawyer. If your situation is complex—like running multiple businesses or hiring family members—it may be worth getting legal advice.
Can You Still Get Coverage Even If You’re Exempt?
Yes, and sometimes it’s smart to do so.
Just because the law doesn’t require you to carry workers’ comp doesn’t mean you shouldn’t have it. If you work in a dangerous job, or if you’re self-employed and can’t afford to miss work due to injury, you might want to buy a policy anyway.
Voluntary coverage is available through most insurance companies. You can buy it to protect yourself, even if you’re exempt.
Conclusion
Understanding who is exempt from workers’ compensation in California can save you money and protect you from trouble. The key groups who are usually exempt include:
Sole proprietors without employees
Independent contractors
Corporate officers or LLC members who own the business
Domestic workers under certain limits
Volunteers
Some family members working without pay
But always double-check the law. One small change in how you run your business can change whether or not you need coverage.
If you’re ever in doubt, get help. A phone call to an insurance agent or the state workers’ comp office can give you peace of mind—and keep your business on the right side of the law.
In California, playing it safe is always the better choice.
Related topic:
What Is the Highest Workers’ Comp Settlement Ever?
What Are the Different Types of Malpractice Insurance for Nurse Practitioners?
Top 6 Malpractice Insurance Providers for Nurse Practitioners
