Do I need workers’ comp if I only have one employee in California?

Yes. California Labor Code 3700 requires every employer to secure workers’ compensation, and the Department of Industrial Relations says that applies even if you have only one employee. Part-time staff count. Skipping coverage exposes you to a stop order, criminal charges and a lawsuit from an injured worker, and the policy usually costs far less than any of them.

I write this for owners of organizations with 10 to 150 people, but the rule starts earlier than that. If you are about to make a first hire, this is the one purchase that cannot wait for the handbook. The first-hire steps by funding stage and when a small business needs HR cover the rest of that list. The glossary entry has the short definition.

Who has to carry workers’ comp in California?

Every employer with an employee. Labor Code 3700 says every employer, except the state, must secure the payment of compensation. There is no headcount threshold and no minimum hours. The DIR fact sheet states that benefits cover all workers, including part-time employees.

The statute gives two ways to comply:

• Buy a policy from an insurer authorized in California.
• Get a certificate of consent to self-insure from the DIR Director, which in practice is for much larger employers.

Two paperwork duties come with coverage. Under Labor Code 3550 you post a notice naming your carrier where employees can see it, and failing to post is a misdemeanor and prima facie evidence that you have no insurance. Under Labor Code 3551 each new employee gets written notice, in English and Spanish, at hire or by the end of the first pay period. DIR publishes the time-of-hire pamphlet for that.

What does workers’ comp cost, and how is the premium built?

The premium is payroll times a rate, and the rate depends on the kind of work. Workers’ compensation rates are applied per $100 of payroll. Three inputs drive the number:

• Class code: the job category the Workers’ Compensation Insurance Rating Bureau (WCIRB) assigns to your operations. An office role and a warehouse role carry different rates.
• Payroll: your estimated pay for each class over the policy year, divided by 100 and multiplied by the rate.
• Experience modification: a factor under 100% reflects better-than-average claims history and a factor over 100% reflects worse, per the Department of Insurance guide. A new business usually has none yet.

For scale, the Department of Insurance approved an average advisory pure premium rate of $1.65 per $100 of payroll, effective September 1, 2026. That is a benchmark across all classes and it leaves out insurer overhead, so your quote will differ. At that average, $60,000 of payroll would produce about $990 before overhead. Your class code, your insurer’s filed rates and its minimum premium decide the real number.

The estimate is not final. The final premium cannot be calculated until the policy term ends, and insurers can audit payroll during the term and for three years afterward, per the same guide. An audit compares what you estimated with what you paid, counts overtime and bonuses, and reviews whether anyone you called a contractor was an employee. Keep payroll records by job category so the audit is a reconciliation, not a surprise bill. If your headcount grows faster than you planned, tell your carrier during the term instead of waiting for the audit to find it.

What happens if I skip it?

Four things can happen, and they stack.

• Stop order: the DIR can serve an order that bars you from using employee labor until you comply. Under Labor Code 3710.1 it takes effect when served, and you owe affected employees up to 10 days of pay. Violating the order is a misdemeanor under 3710.2.
• Penalties: Labor Code 3722 sets a penalty of $1,500 per employee with the stop order. If you were uninsured for more than a week in the prior year, it becomes the greater of twice the premium you would have paid or $1,500 per employee.
• Criminal charge: failing to secure coverage is a misdemeanor under Labor Code 3700.5, with up to a year in county jail, a fine of at least $10,000, or both.
• A lawsuit with the defenses removed: an injured employee of an uninsured employer may sue in court under Labor Code 3706. Section 3708 presumes the injury came from your negligence and removes the usual defenses.

If a claim is found to exist while you were uninsured, 3722(d) adds a per-employee penalty that rises when the claim is compensable. The state’s Uninsured Employers Benefits Trust Fund can pay the injured worker first and then pursue you for reimbursement, per the DWC FAQ. One uninsured injury can cost more than years of premium, and the stop order lands on the same day your business needs its people.

Can owners, officers and family members opt out?

Sometimes owners can. Family members hired as staff generally cannot.

• Corporate officers and directors: they are employees while paid for services under Labor Code 3351(c), but Labor Code 3352(a)(16) lets an officer or director who owns at least 10% of the stock be excluded with a signed waiver, if they carry health insurance. A sole-shareholder officer is excluded unless coverage was elected.
• Partners and LLC members: working members who receive wages are employees under 3351(f), but a general partner or managing member can waive coverage in writing under 3352(a)(17).
• Sole proprietors: they are not on the statutory employee list, and the DWC FAQ says they can be covered only if the policy provides it.
• Family: the family exclusion in 3352(a)(1) covers a residential domestic worker employed by a parent, spouse or child. It does not cover a niece or cousin working in your office, and a DLSE FAQ treats a part-time relative as an employee.

A waiver only protects you if it is in writing and the carrier accepts it. It also cuts both ways: an excluded owner who is hurt on the job has no claim under the policy, so weigh the savings against your own health coverage and your own risk before you sign. Ask your broker to confirm in writing who is excluded and who is on payroll.

Do contractors and remote staff count?

Contractors count if they are really employees, and remote employees count the same as everyone else. For workers’ comp, Labor Code 3351(i) treats anyone who is an employee under the ABC test in Labor Code 2775 as an employee. If you called a worker a contractor and lose that test, the person was an uncovered employee the whole time, which puts you in the uninsured scenarios above. I do not re-explain the test here. The ABC test guide walks through it.

For remote staff, I found nothing in the statute or in DIR guidance that makes the place of work an exception, and Section 3700 reaches every employer. Treat an employee at a kitchen table in Sacramento as covered, and ask your carrier to confirm that remote payroll is reported on the policy. Misreporting payroll invites a premium audit adjustment.

How do I buy it, and what should I ask a broker?

Buy it before the first day of work, from a broker or directly from an insurer. The State Compensation Insurance Fund is a non-profit state insurer that competes with private carriers and acts as the insurer of last resort if private companies will not write you. You can check any employer’s coverage on the WCIRB’s coverage lookup, though it is not proof of insurance. Ask the carrier for a certificate of insurance, and keep it with your payroll records so you can produce it when a client, landlord or lender asks.

Questions I would put to a broker:

• Which class codes will my roles fall into, and why?
• What is the minimum premium, and is it due at binding?
• How does the audit work, and what payroll records will you ask for?
• Are owners excluded, and is the waiver on file?
• Are my remote and part-time staff reported on the policy?
• What happens to my premium if I add a second employee mid-year?

What should I do this week?

Do these four things before your next payroll run:

1. List every person who does paid work for you, with a role, hours and where they work.
2. Get two quotes using that list, with class codes written out.
3. Post the carrier notice and give each new hire the time-of-hire pamphlet.
4. Review anyone you pay as a contractor against the ABC test.

If you want a second set of eyes on the whole list, the California HR compliance check-up reviews your classification, postings and personnel files against the rules at your headcount. You can also start with the free California HR compliance checklist.

McKinley holds a J.D. but is not a licensed attorney. Articles here are general information, not legal advice. For your specific situation, talk with an employment attorney.

Data current as of September 2026. Sources are linked where each figure appears.