What’s up with CA Workers Compensation in 2014?

Work Comp this year has been quite a challenge. Increases in premium have been rather prevalent for our clients. In some cases, we’ve found it advantageous price-wise to move some clients to the State Fund (SCIF). Although SCIF is supposed to be the insurer of last-resort, we’re also seeing cases where they are also the least expensive.


SB 863, which was intended to address some of the causes of the increases in cost, was signed into law on Sept 18, 2012. A recent panel was divided as to whether or not the reforms have been successful. Some costs have seen reductions while other have not.

Workers Compensation rates on the rise in 2012

stack-of-moneyWhen payrolls are low, rates tend to go up since there’s less payroll to spread out the costs of injuries. Here in California, we have seen a couple of double-digit increases in the advisory rates put out by the WCIRB and the Department of Insurance in the past year and it looks like there’s another one coming.

California bureau to recommend 12.6% increase for workers compensation premiums 

There is apparently some work being done behind the scenes in Sacramento to address the escalating cost of Work Comp, so hopefully there will be some relief soon.

Workers’ Comp Deal in the Works for California http://www.insurancejournal.com/news/west/2012/08/09/258903.htm

Is that Worker an Independent Contractor or an Employee?

The question of whether or not a particular worker is an Independent Contractor or an Employee is one that we frequently discuss with our clients. Unfortunately, there are no pat answers. The checklist below can help give you a better idea where you stand.

This is because there are several agencies that you have to deal with and because they don’t publish hard and fast rules, only guidelines. There are many factors involved and a wide variety of contracting situations.

That being said, there certainly are factors to consider. Keep in mind that not meeting any one item isn’t necessarily going to be the deciding factor. The table that follows comes from information in the IRS 20-factor test. The more statements that are true in one column or another regarding your relationship with the worker indicates whether the relationship leans towards Employment or Sub-contracting from the IRS point-of-view. From the perspective of the CA Contractors State Licensing Board (CSLB), item #13 is of particular importance. In general, the more weight you have on one side the stronger your case will be.

An Employee usually A Contractor usually
1 has to follow your instructions as to when, where and how they work can get the job done as he sees fit based on the contract
2 is trained by you is already qualified to do the work
3 does the same work as your business often is used to do specialized work you don’t normally do
4 can’t subcontract out work can hire sub’s as needed
5 doesn’t hire assistants can hire employees as needed
6 works for you over long or regular periods of time does work for you sporadically
7 works for you at the hours you set can set his own hours
8 is required to work full time can work for whomever and whenever he wishes
9 works at your premises or at place you designate usually has their own place of business
10 has to do their work in the order or sequence you specify can decide sequence for themselves for the desired result
11 has to provide reports does not have to account for themselves
12 is paid by the hour, week, or month is paid by the job
13 doesn’t have to pay business and travel expenses pays his own business and travel expenses
14 is provided tools, materials, or equipment provides his own tools, materials and equipment
15 has little or no investment in his own tools and equipment has a significant investment in tools and equipment
16 cannot suffer a loss has the risk of a possible loss instead of a profit
17 works for you only works for multiple customers, including you
18 doesn’t offer his services outside of your employ offers his services out to the general public
19 can be fired at any time during a job have limitations on firing per their contract
20 can quit work at any time without any liability cannot walk away from a job without a financial risk

Why do I need Workers’ Compensation Insurance?

It’s the law


Workers Compensation law was established in most states between 1910 and 1920. It is designed as a trade-off. In exchange for preventing employees from being able to sue employers for on-the-job injuries or illness there is a requirement for employers to maintain workers’ compensation insurance. It is required even if you only have one employee.

Failure to have workers’ compensation coverage is considered a criminal offense. In California the basic punishment is either a fine of up to $10,000 or up to one year of jail time with other penalties on top of that.

What if I have no employees?

Unless you’re a roofer, you are usually not required to have workers’ compensation coverage. However, it is required for any employee you hire even if it is only temporary. We have seen customers hire casual labor who ended up being injured. For that reason, we recommend all businesses have a workers compensation policy even if they currently have no employees. A minimum-premium policy (also called a certificate policy) typically runs between $500 and 600 per year.

For more information

CA Div of Workers Compensation: Employers Frequently Asked Questions http://www.dir.ca.gov/dwc/faqs.html