Employees, Payroll & Workers' Comp

Employees, payroll, and workers’ compensation rules are heavily tested on the Law & Business exam because the penalties for getting them wrong are severe — a missing workers’ comp policy alone can get a license suspended or revoked. This topic covers who must be covered, the deadlines for reporting injuries and paying benefits, the penalties for going uninsured, and the registration rules for home improvement salespersons.

When workers’ compensation is required

In California, workers’ compensation is mandatory the moment a contractor has even one employee — full-time or part-time. A contractor with no employees generally files a workers’ compensation exemption with CSLB instead. Two classifications are the exception: a C-39 Roofing contractor and a C-22 Asbestos Abatement contractor must carry coverage even with no employees.

Employer liability extends to employed relatives on the same basis as any other employee. A licensee must keep on file a current Certificate of Workers’ Compensation Insurance or a Certification of Self-Insurance.

An employer may provide coverage in one of three ways:

• A standard approved policy
• A self-insurance permit
• A collectively bargained ADR (alternative dispute resolution) program

Notices, posters, and reporting deadlines

New employees must receive written notice of their workers’ compensation rights at the time of hiring or by the end of the first pay period. The Notice to Employees poster must be posted conspicuously where employees gather, and in both English and Spanish when there are Spanish-speaking employees. Failing to keep it posted is punishable as a misdemeanor.

Injury reporting runs on tight clocks:

Until the claim is accepted or rejected, the employer’s liability for medical treatment is capped at $10,000.

Disability benefits

Temporary disability payments usually begin after the third day of disability. That three-day waiting period is eliminated when the disability extends beyond 14 days or requires overnight hospitalization. If the worker cannot return to work within 60 days after the temporary disability period ends, the supplemental job displacement benefit may apply.

Penalties for going uninsured

Failure to secure workers’ compensation is a misdemeanor, and CSLB can suspend or revoke the license. A Stop Order prohibits the use of employee labor until insurance is provided. The civil penalties scale with the situation:

• No claim yet, simply uninsured: the greater of twice the premium that should have been paid or $1,000 per employee.
• Uninsured after a noncompensable claim: $2,000 per employee.
• Uninsured after a compensable injury claim: up to $10,000 per employee.
• Willful failure plus an injury: a 10 percent penalty added to disability compensation, plus attorney fees.

Under SB 291, CSLB cannot renew or reinstate a license that violates workers’ comp requirements until a current, valid certificate is provided.

The Attorney General may file a civil action to suspend, revoke, or deny a license for failure to pay workers or comply with a wage judgment — but must first notify CSLB, which may intervene or collaborate.

Home Improvement Salesperson (HIS) registration

A person who solicits home improvement contracts for a licensed contractor away from a fixed business location must register as an HIS. Applicants must be at least 18 and submit fingerprints; there are no education, residency, or experience requirements. The fee is $200, and registration expires two years from the last day of the month it was issued. A single registration lets the salesperson represent multiple employers, and the licensee must notify CSLB in writing before employing the HIS and when that employment ends.

Several roles are exempt — a qualifier or officer of the licensed contractor, someone who only sets appointments, service or repair people whose calls are limited to the work the buyer requested, and salespersons working only at a fixed establishment where goods are displayed.

Payroll references to know

Two publications appear on the exam: the California Employer’s Guide, published by the EDD as form DE 44, and IRS Publication 15 (Circular E), the Employer’s Tax Guide. A contractor who staffs up through union hiring halls must also know the union’s master labor contract.