Penalties for Non-Compliance

In California, workers' comp insurance is mandatory for all businesses with employees. The penalties for non-compliance can lead to substantial financial loss, criminal charges, and disruption to business operations.

1. Criminal Penalties

• Failure to carry workers' comp is a criminal offense in California.
• It is classified as a misdemeanor, which can result in:
  • A fine of up to $10,000,
  • Imprisonment in a county jail for up to 1 year, or
  • Both penalties.

2. Civil Penalties

• The California Division of Labor Standards Enforcement (DLSE) can issue penalties of:
  • $1,500 per employee if you are uninsured, or
  • $100 per day per employee you remain uninsured, up to $100,000 maximum.

3. Stop Work Order (SWO)

• The Division of Workers' Compensation (DWC) can issue a Stop Work Order to your business.
• If issued, you must immediately cease all operations.
• Failure to comply with a Stop Work Order can result in:
  • An additional penalty of $10,000.

4. Liability for Injured Employees

• If an employee is injured while you’re uninsured:
  • You are personally liable for the medical expenses, lost wages, and other costs related to the employee's injury.
  • The employee can file a claim with the Uninsured Employers Fund (UEF), which can pursue reimbursement from you.

5. Increased Risk of Lawsuits

• Without workers' comp, employees can sue you directly for their injuries.
• Unlike workers' comp claims (which limit payouts), lawsuits can result in:
  • Substantial damages, including pain and suffering, punitive damages, and legal fees.