California's New Workers' Comp Law for Contractors in 2023

If you run a business in California, you know the Golden State updates its labor laws pretty frequently. And it's important to keep up with them since you could get fined or have your license suspended if you don't comply. 

One particular law the state of California updated last year is its workers' compensation law.

What changed? Let's answer that burning question right away. 

New Workers' Comp Law in California 

Effective July 2023, workers' comp insurance is mandatory for certain licensed contractors in California, even if they don't have any employees. This includes licensed contractors in concrete (C-8), heating, ventilation, and air-conditioning (C-20), asbestos abatement (C-22), and tree service (D-49). 

If you're one of these contractors, you must have workers' compensation insurance right now, even if you don't have any employees.

The new regulations come into effect as a result of Senate Bill 216, signed into law by California Governor Gavin Newsom on Sep. 30, 2022. Implemented in stages, SB 216 aims to extend the workers' comp requirement to all licensed contractors by 2026. 

Previously, you only needed workers' compensation insurance if you had one or more employees (unless you were a roofing contractor holding a C-39 license).

Bonus tip: Comply with the new California law without throwing money down the drain by using Hourly. We connect your workers' comp insurance with your payroll data, so you always pay accurate comp premiums down to the penny. 

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Are There Exceptions to SB 216?

Yes. There are two exceptions to SB 216:

• If you form a joint venture with another contractor, you can file a certificate of exemption with the Contractors State License Board (CSLB) stating that you don't have any employees and aren't subject to the state's workers' compensation regulations.
• If you hold a license other than C-8, C-20, C-22, C-39, or D-49 and don't have any employees, you can also operate without a workers' compensation insurance policy until January 2026 by filing for a certificate of exemption. 

But how much should you be spending on workers' compensation in 2023 with the new rules? Let's dig in to find the answer. 

What Is the Workers' Comp Rate for 2023 in California?

Workers' compensation premiums vary by insurer, industry, and type of employee. However, as a benchmark rate for 2023, the California Insurance Commissioner recommends an average workers' comp pure premium rate of $1.45 for $100 of payroll with a planned $1.50 increase in September 2023. 

This benchmark rate updates every year in September based on suggestions from the Workers' Compensation Insurance Rating Bureau of California (WCIRB).

That said, this is an average rate. The applicable pure premium rate varies depending on the type of employee. For instance, WCIRB recommends a pure premium rate of $1.53 per $100 of payroll for a construction site salesperson. 

In contrast, for workers dealing with asbestos, WCIRB recommends a pure premium rate of $9.58 per $100 of payroll since workers' comp claims tend to be higher due to the risk of asbestos exposure. 

Not to mention, all these rates exclude your insurance carrier's taxes, dividends, and profits since the pure premium rate only accounts for workers' compensation claims. Add those in, and you have the insurance company's rate, which tends to be higher. 

Now that we've covered your burning questions about the workers' compensation system, let's discuss the requirements of California's workers' comp law. 

Is Workers' Compensation Mandatory in California?

If you're a California employer, you're required to offer no-fault workers' compensation coverage to your workers as per California Labor Code Section 3700. Put simply, no-fault means workers don't have to prove you at fault to get insurance coverage if they suffer an injury during work. 

California workers' comp coverage law doesn't include "coming and going" injuries or injuries that occur during the employee's regular commute. 

What Is the Coming and Going Rule in California Workers' Compensation?

The Golden State considers coming and going to the workplace as a personal activity. So, if a worker injures themself while traveling to or back from work, workers' compensation insurance doesn't cover those injuries. 

However, there are a few cases in which workers' compensation might still pay. Examples include you asking an employee to perform a specific task on the way and an employee traveling as part of their job responsibilities. 

Workers' Compensation Benefits in California

If one of your employees gets hurt at work, here's what you're required to provide under California's Workers' Compensation Law:

• Medical expenses: First off, you're required to take care of any medical costs that result from a work-related injury. This means picking up the tab for things like doctor's visits, medicine, hospital bills, surgeries, and any other medical treatment an employee would need from a healthcare provider. Be sure to make medical care a top priority for any injured employee—and get them help ASAP.
• Temporary disability benefits: If one of your employees can't perform their usual duties because of a work-related injury, you'll need to provide temporary disability benefits. These are meant to cover the employee's lost wages while they recover. You'll continue these payments until their medical provider gives them the okay to return to work. The maximum duration for these payments is typically 104 weeks. In cases of severe injuries such as amputations or significant burns, the benefits can extend up to 240 weeks, but this is limited to five years from the date or injury. If they still aren't fully recovered after this time, they may be eligible for permanent disability benefits.
• Permanent disability benefits: If a work-related injury results in long-term impairment or disability, you're required to provide permanent disability payments. How much you pay usually depends on a disability rating, which determines how much the injury affects the employee's ability to make a living.
• Supplemental job displacement benefits: If an injury keeps an employee from returning to their original job, you'll need to provide supplemental job displacement benefits. These help cover the cost of education or skills training with a state-approved provider, helping the employee adapt to new work requirements.
• Death benefits: Last but certainly not least, if an employee tragically loses their life due to a work-related accident, you're responsible for covering funeral expenses and providing financial support to their dependents. It's a difficult subject but an essential part of your responsibilities as an employer.

And remember: Your workers' comp insurance should kick in to cover these expenses, so make sure you talk to your insurance agent as soon as possible if a team member gets hurt or sick.

Keeping Up with Laws on Workers' Compensation in the Golden State

Workers' compensation insurance is a win-win for business owners and employees. It protects you from lawsuits and your injured workers from losing their hard-earned money treating a work accident.

But you must stay up to date with new laws so you can always stay in compliance. The best way to do that? Check out the employer's section of the Division of Workers' Compensation's website.