New changes to workers' compensation requirements for contractors are coming to California, and it's an update that will impact every licensed contractor in the state.
New CA Law Requires ALL Contractors to Carry Workers Comp
According to California State Sen. Bill Dodd, D-Napa, author of Senate Bill 216 requiring almost all contractors in California to carry workers' compensation coverage, the new law is necessary due to the tendency of many small contractors to claim they have no employees when they regularly hire day laborers or undocumented aliens.
If these workers were injured on the job, they would have to pay out of pocket for medical care. In addition, they would have no way to cover lost wages due to a work-related accident or illness, which workers' compensation insurance covers.
In these scenarios, lawsuits are common. However, it's not just the contractor who hired the uninsured worker who gets named in a lawsuit; the entity or individual who hired the contractor is often included in these suits.
California Rolling Out SB216 in Two-Phase Introduction
Prior to the law (SB216) being signed into effect, any contractor with at least one employee was required to carry workers' compensation insurance, while contractors with no employees were not. Only one single class code was the exception to this law: roofers.
The new law will roll out in two distinct phases, ensuring the high-priority class codes are covered first and then expanding to include all contractors.
2023: High Priority Sectors
The first wave of contractors required to carry workers' compensation insurance (even if they don't have any employees) begins in 2023, and covers high-priority sectors including:
- Concrete (C-8 license)
- Heating and air conditioning (C-20)
- Asbestos abatement contractors (C-22)
- Tree service contractors (D-49)
2026: All Sectors
Effective Jan. 1, 2026, all licensed contractors (including applicants for licensure) will be required to carry workers' compensation insurance. The only exception will be contractors who are organized as a joint venture and who have filed a certificate of exemption from workers' compensation.
What Are The Penalties for Not Carrying Comp?
According to the bill, the Contractors State License Board will be required to suspend the license of any relevant contractors who did not have coverage between July 1, 2023, and Jan. 1, 2026, if those contractors had employed and no comp coverage.
Comp Protects Workers in the High Risk Construction Industry
Workers' compensation is the only commercial insurance policy designed to protect workers in the high risk construction industry.
While other policies can ensure a contractor or construction business owner gets reimbursed for financial losses due to lawsuits, property damage, destruction to a job site, or an auto accident (to name a few), workers' comp is meant to protect your employees from financial loss if they get hurt or ill as a result of performing their job.
When you carry workers' compensation insurance, your employees and day laborers don't have to worry about the high cost of medical bills if they fall off a roof or ladder. Nor do they have to worry about losing wages if they can't work after injuring themselves on a power tool.
The construction industry has the highest occurrences of work-related deaths, and the top most frequently cited OSHA workplace safety violations centers around fall protections.
While you may not be able to prevent every possible injury, accident, or illness on a job site, SB 216 will ensure that you are able to provide insurance coverage for the hardworking men and women who are helping you build your business.
Learn more about SB 216.