Do You Need Workers’ Compensation Insurance As A Construction Contractor in California?

What Is Workers’ Compensation Insurance?

Workers’ Compensation Insurance – often referred to simply as workers’ comp – is a type of insurance designed to provide financial and medical protection to employees who suffer job-related injuries or illnesses.

This insurance is similar to liability insurance but is specific to people. If (and when) someone gets hurt on a job site, workers’ comp covers a number of costs for the affected worker, including medical care, temporary and permanent disability benefits, supplemental job displacement benefits, and death benefits.

The purpose is to support injured workers in their recovery and return to work while protecting employers from lawsuits by injured employees.

Even though contractors now have to supply another piece of insurance, it really is beneficial to both parties – workers have a safety net when doing sometimes dangerous construction work, while employers are indemnified from being sued for on-site accidents.

Does the CSLB Require Workers’ Compensation Insurance to Obtain a Contractor’s License?

At the time of writing, the California Contractors State License Board (CSLB) does not require that all construction contractors possess workers’ comp to obtain and maintain a contractor’s license; however, in the next few years, all contractors will be required to.

As of January 2024, here’s the classifications and situations where workers’ comp is required:

  • Any contractor who has employees
  • All active C-8 Concrete contractors, C-20 Warm-Air Heating, Ventilating and Air-Conditioning contractors, C-22 Asbestos Abatement contractors, C-39 Roofing contractors, and/or C-61/D-49 Tree Service contractors
  • Your license is qualified by an RME

This mandate is crucial to ensure that all contractors operating in the state are adequately covered for any workplace injuries or illnesses that their employees might encounter.

Recent Changes to Workers’ Compensation Insurance Requirements

The most significant recent change in California’s workers’ compensation insurance requirements is the enactment of Senate Bill 216.

This law, which came into effect in September 2022, expands the workers’ compensation insurance requirements to include all contractors by January 2026 – irrespective of whether they have employees!

This is a massive departure from the previous law, which mandated insurance only for contractors with employees and specific classifications. Now, every contractor – from general contractors with 50 subs on site to handymen – will have to have workers’ comp insurance.

In the meantime, specific contractor trades such as concrete (C-8), HVAC (C-20), asbestos abatement (C-22), and tree service (D-49) are now required to have workers’ comp, regardless if they have employees or not​​​.

Do I Need Workers’ Compensation Insurance If I Don’t Have Employees?

Under the new California law, even contractors without employees are required to have workers’ compensation insurance – but you have until 2026 to take action.

While you don’t need workers’ compensation right now if you don’t have employees, contractors who are sole proprietors or have no employees must still comply with this insurance mandate​​ in two years.

How Much Workers’ Comp Insurance Does a Contractor Need?

The required amount of Workers’ Compensation Insurance for a contractor in California depends on various factors, including the size of the business, the type of work performed, and the level of risk associated with the specific trade.

Contractors can obtain this insurance through a licensed insurance company or opt for self-insurance, which requires state approval, a net worth of at least $5 million, and a net income of $500,000 per year​.

Consequences For Noncompliance

The penalties for failing to carry workers’ compensation insurance in California are severe. They not only include losing your license, but you can even face imprisonment for up to one year, fines of up to double the amount of premium that would have been due, or a minimum fine of $10,000.

Additionally, the California Division of Labor Standards can issue a stop order, legally demanding cessation of all employee labor – which means more money disappearing into thin air. Noncompliance can also result in a misdemeanor criminal offense, punishable by up to 60 days in county jail or by a fine of up to $10,000, or both. In cases where an uninsured worker is injured, the employer may face a penalty of up to $100,000​​​!

In summary, workers’ compensation insurance is a mandatory requirement for all construction contractors in California, by January 2026, regardless of their employee count. Right now, only certain contractor classifications need to have workers’ comp, regardless of employees or not.

If you don’t have workers’ comp yet, you might as well take the plunge – as it’ll be required in two years anyway!

This entry was posted in Contractor Business, Contractor Jobs, CSLB News, Tips on by .

About CSLS

Contractors State License Service (CSLS) is the largest school in California devoted to the Construction professional. For over 23 years, CSLS has helped its students pass the exam to become licensed contractors in the State of California, licensing more students than any other school. From our main offices in Southern California, CSLS operates over 25 locations with full-service support and classrooms. We have grown to this extent by providing quality, professional services. In comparison, this provides 7 times the number of convenient locations than the second largest contractor school. Contractors State License Services is one of the only contractor schools in the state that is run by educators, not lawyers or people mostly interested in the bonding and insurance business. Contractors State License Services formerly operated under the oversight of the State of California's Bureau for Private Post Secondary and Vocational Education. As of January 1 2010, the new Bureau for Private Postsecondary Education (BPPE) came into existence replacing the BPPVE. CSLS now operates under the provisions of the California Private Postsecondary Education Act of 2009 (CPPEA), Article 4 Section 94874(f). Our Mission is simple; We can help you pass your California Contractors License Exam. Celebrating our 25th year, CSLS has helped over 120,000 students pass the California contractor licensing exam to become licensed contractors in the State of California. Additionally, we offer complete home study and online contractor’s license programs to help you pass your California contractors license exam. CSLS offers licensing classes for all types of contractor licenses, including General Engineering Contractor, General Building Contractor, Specialty Contractor, Insulation and Acoustical Contractor, Framing and Rough Carpentry Contractor, Cabinet, Millwork and Finish Carpentry Contractor, Concrete Contractor, Drywall Contractor, Electrical Contractor, Elevator Contractor, Landscaping Contractor, Warm-Air Heating, Ventilating and Air-Conditioning Contractor, and many others. For a complete list of contractor licenses, visit and tuned for more informative posts.