California law is strict when it comes to protection for employees against work-related injuries or illnesses. The law requires employers to carry Contractors Workers’ Compensation insurance even if they have only one employee. If you are in the roofing business and have no employees, you must still carry workers’ comp. That’s the law, and if you are caught breaking it, there are consequences:
- Failure to Post – Employers are required to post a “notice to employees” poster in a conspicuous place at the worksite. Failure to do so is considered a misdemeanor and can result in a penalty of up to $7,000.
- Illegally Uninsured – If an employer is found to be illegally uninsured, it is considered to be a misdemeanor offense punishable by a fine of not less than $10,000 or up to a year in the county jail, or both. The state may also issue a penalty of up to $100,000.
- Illegally Uninsured and Employee Injured – If your business is uninsured and an employee suffers a work-related injury, your business becomes responsible for paying all medical bills of the injured employee and the employee can file a civil suit against you.
But wait, there’s more! If your business decides to risk not having workers’ comp as required by the California State Labor Commission and you continue operating your business while remaining uninsured; there’s a lot more that can happen to you:
- Stop Order – If your business is found to be violating state labor commission laws, a stop order will be issued against you and your company. Once a stop order is issued, your business cannot operate with employees until you obtain adequate coverage, and you are still subject to the appropriate fines and penalties.
- No Coverage and Claim Filed – If an employee is injured on the job and files a claim for coverage, but your company is uninsured, it can really get expensive. If a judge determines that your company was uninsured, your company may be assessed a fine of $10,000 per employee that was on your payroll at the time of the claim up to $100,000.
If you, as a sub-contractor, are working for a General Contractor and are unable to provide sufficient proof of state-mandated worker’ compensation insurance coverage, your General Contractor will be required to pay an additional premium to their insurance company and will most likely deduct the additional premium from any compensation due to your company. Or, if your company has already received payment, the General Contractor is likely to file a civil suit against your company to recoup the additional premium they were forced to pay on your behalf.
Yes, workers’ compensation is a pain and yes, depending on your business classification, it can be very expensive, but, the penalties for not obeying the labor laws in California are designed to put you out of business.
Fairbanks Insurance Brokers is a leading source for contractor’s insurance services.
Here is What We Recommend
General Liability: Contractors General Liability will be the foundation of protection for your business. The coverage will respond if you or your employees are found liable for bodily injury, property damage, or have a products/completed operations complaint. The coverage also covers defense costs for your business to respond to any lawsuits brought by a third party.
Workers’ Comp: Many states will require contractors to provide workers’ compensation insurance coverage for their workers before they can begin a project. Accidents will happen at the job site that can result in an employee becoming injured and missing work. Your workers’ compensation coverage will provide financial assistance for medical expenses and lost wages.
Surety Bonds: It’s very likely that your state will require you to be licensed before you can begin operations. Most states and customers will require contractors to offer a license or surety bond before you are allowed to bid on a job or begin working.
Commercial Auto: Typically, most contractors will have light and heavy vehicles that require commercial auto insurance to make certain their vehicles can be repaired or replaced in the event of an accident, vandalism, or theft.
Tool Coverage: Also known as Inland Marine Insurance, this policy will provide for reimbursement for expenses to repair or replace tools and equipment. Your tools represent an important part of your livelihood, so we always encourage carpentry contractors to consider this valuable coverage.
For more information and a free commercial insurance quote, contact an insurance professional at Fairbanks Insurance Brokers at (949) 595-0284.