Workers’ Compensation is the primary insurance that covers employees injured on the job, regardless of fault. There is a a federal version managed by the Department of Labor, offering compensation to government agency civilian workers. Each state has their own workers compensation program. We will focus on California’s workers’ compensation program, which mandates that even employers with a single employee must carry workers’ comp insurance. This comprehensive coverage includes essential benefits such as medical care, disability assistance, job displacement aid, vocational rehabilitation, and compensation for work-related injuries, illnesses, or fatalities.
Obtaining Workers Comp
How to get coverage
You can get coverage through an agent or broker for a private insurer. Insurance Brokers & Agents of the West is an example of a business that can help you select a broker. You can also get insurance through the State Compensation Insurance Fund (State Fund), a division of the California Department of Industrial Relations.
Cost
The cost of workers’ compensation will depend on a number of things, such as how many employees you have and the type of work they are doing. Prices differ depending on the insurer or broker, so you should shop around. Generally, workers’ compensation can run between 10 to 20 percent of the wages you pay your employees.
California Workers Comp and Cooperatives
Worker cooperatives may encounter challenges in securing a suitable workers’ compensation plan tailored to their unique structure. Understanding the potential exemptions available for worker cooperatives in workers’ comp is crucial.
In some cases, some or all of the members of a worker cooperative can elect (by signing a written waiver) to be excluded from worker’s compensation insurance coverage, even if the cooperative treats their workers as employees for some purposes. An “employee” is anyone who works for an employer, whether they have a formal contract or not. Here is more information for determining if someone is an employee.
The Department of Worker’s Compensation has a fact sheet with information on worker’s compensation benefits.
Workers Comp Exemptions
The California Labor Code requires that all employees be covered by workers’ compensation insurance; however, there are some relevant exclusions. Certain individuals are not considered “employees” under certain conditions.
- Cooperative Corporation: In the case of a worker cooperative that chooses to form under the Cooperative Corporation Law, all worker-owners who hold roles of officers or directors, and have sufficient disability insurance and health coverage, may choose to waive their rights to be covered by a workers’ compensation insurance policy . However, if there are co-op members that do not serve on the board of directors, or otherwise hold roles typical of officers of a corporation, then workers’ compensation insurance will be required for those cooperative members who are not officers or directors.
- Note that a worker-owned cooperative corporation that hires non-member employees will definitely need to carry workers’ compensation for those employees. Such non-officer, non-board-member employees are not eligible to waive workers compensation coverage.
- Partnership/LLC: And this means, in the case of a that a worker cooperative that chooses to form as a partnership or LLC, all general partners of the partnership (those actively managing the partnership) and all managing members of the LLC (those actively managing the LLC) may also choose to waive their rights to be covered by workers compensation insurance. There is no requirement that general partners or managing LLC members state that they are covered by health or disability insurance in their written waiver.
- Note also that a worker cooperative that chooses to form as a partnership or LLC will also be exempt from carrying workers’ compensation if the working partners/members all participate in management.
Workers Comp and Worker cooperative conversion
In some cases of worker cooperative conversion, even if the worker-owners still consider themselves employees, they might not have to follow certain legal rules anymore, like providing workers’ compensation insurance. For instance, there are exceptions in Section 3351 of the California Labor Code that say not all workers have to be covered by workers’ comp insurance. The specifics are listed above.
At least one business that we know of converted to worker-ownership, brought all new worker-owners onto the Board, canceled workers’ compensation insurance for those worker-owners, and spent the savings on health benefits and long-term disability insurance.
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