I'm sure you have heard of the duck test, "If it looks like a duck, swims like a duck, and quacks like a duck, then it probably is a duck." I have mentioned this before, but if you have staff you are required by law (most states) to carry workers' compensation insurance. Workers' compensation insurance primarily provides coverage for your employees if they are injured on the job and need medical attention as well as disability income while out due to the injury. 

We hear many reasons why small business owners do not have employees including, "I don't need to carry it since I 1099 my staff." While it may be true that independent contractors do not need be furnished workers' compensation insurance, government agencies such as the California Department of Industrial Relations are cracking down on employers that do not provide workers' compensation for employees. What most often will happen is that an employee gets injured on the job. They do not have health insurance and claim it was a work related injury. The employee and health providers look to the employer for coverage.

Oops, no workers' compensation insurance! The employee cannot afford the bills and gets the appropriate agencies involved because they feel they are an employee. The DIR and IRS essentially will do a "duck test" of their employment. Some questions you should be asking yourself are:

  • Do I set hours for staff?
  • Do I train staff?
  • Do I direct and control staff?
  • Do I furnish tools and material to staff to complete their job?

 If you answered yes to any or most of these (especially controlling staff) then chances are they would likely fall into the employee classification. The penalties for not providing employees with workers' compensation insurance in California are criminal and include monetary fines of up to $100,000. This is serious business...

The good news is that workers' compensation insurance is at a 5-6 year low right now. We work with some of the best markets that can easily and affordable provide you with appropriate coverage. Please call or contact us with any questions about this or any other business insurance question or concern. You can also request a quote here