Regardless if your business is a sole proprietorship, a partnership, or a corporation, you need to have workers’ compensation insurance when you have W-2 employees.  The only exception is for owners of the facility that have elected to exclude themselves from workers’ compensation insurance coverage.  In California, Labor Code Section 3700, clearly states an employer needs to have workers compensation insurance for their employees.  Failure to do can result in a criminal offense, fines, and possibly permanent closure of your facility.

Yes, you can be fined and more. If the Division of Labor Standards Enforcement (state labor commissioner) determines an employer is operating without workers' compensation coverage, a stop order will be issued. This order prohibits the use of employee labor until coverage is obtained, and failure to observe it is a misdemeanor punishable by imprisonment in the county jail for up to 60 days, or by a fine of up to $10,000, or both. The Division of Labor Standards Enforcement will also assess a penalty the greater of (1) twice the amount the employer would have paid in workers’ compensation premiums during the period the employer was uninsured, determined according to subdivision (c), or (2) the sum of one thousand five hundred dollars ($1,500) per employee employed during the period the employer was uninsured. [Labor Code section 3722(b)].

Additionally, if an injured worker files a workers' compensation claim that goes before the Workers’ Compensation Appeals Board and a judge finds the employer had not secured insurance as required by law, when the dispute is resolved the uninsured employer may be assessed a penalty of $10,000 per employee on the payroll at the time of injury if the worker's case was found to be compensable, or $2,000 per employee on the payroll at the time of injury if the worker's case was non-compensable, up to a maximum of $100,000. [Labor Code Section 3722(d) and (f).]

Finally, as noted in answer to a previous question, failure to secure workers' compensation insurance is a misdemeanor punishable by imprisonment in the county jail for up to one year, or by a fine of up to ten thousand dollars ($10,000) or by both that imprisonment and fine. (Labor Code Section 3700.5) (Source:  Dept. of Industrial Relations. June 2016.Web. 14 Sept 2016 <//www.dir.ca.gov/dwc/faqs.html>)

When an employee is injured, workers’ compensation law and benefits protect the employer from civil action from the injured employee and any bills that incur.  Without a workers’ compensation policy in place, you as the employer are responsible for all medical bills, benefits and compensation that the injured employee incurs.  In fact, a civil lawsuit can be filed by the injured employee, thus risking your personal and business assets.

When you have a workers’ compensation insurance policy, you need to post “Notice to Employees” poster provided by your insurance carrier in a visible place for employees.  This poster contains information on workers’ compensation coverage, medical care, and contact information for employees who get injured.   Ideally, it should be posted next to Federal and State Labor Law posters.  It you fail to post this notice, you can be charged with a misdemeanor and have a civil penalty up to $7,000 per violation.

When you hired a new employee, a workers’ compensation pamphlet should be given explaining an employee’s rights, MPN directory, duties, and how to file a claim.

When an employee reports an injury to the employer, the claim should be reported within 24 hours of acknowledgment.  The person in charge of workers’ compensation claims should assist in filing the claim on behalf of the employee.   Depending on the insurance carrier, workers’ compensation claim can be filed online, on the phone, or even fax in directly to the insurance carrier.  If not, an injured employee can file directly through Division of Workers’ Compensation (DWC) website, and then the employer will be notified of the claim.

A Medical Provider Network (MPN) is a network of primary care doctors, specialists, clinics, urgent care facilities, and hospitals whom already agreed with a workers’ compensation insurance carrier and approved by Division of Workers’ Compensation (DWC) administrative director to provide medical care to an injured employee.  Unless an employee is eligible or enrolled in a pre-designated personal doctor prior to any injury, an injured employee must be treated through a MPN to receive medical care or services.  Each insurance carrier can create their own MPN directory of health care providers as long as it is approved by the Division of Workers’ Compensation (DWC).  When an injured employee goes through a designated MPN directory, it helps to coordinate the medical care, pay medical bills and control the cost for all parties involved.

Before an injured employee gets to medical care for an injury, an employer needs to follow the MPN directory unless there is a pre-designated personal doctor or a life threatening situation.  There are basically 3 types of medical care: Doctor Office Visit, Urgent Care Clinics or Emergency Room Hospitals.  To make sure the workers’ compensation claim is processed correctly and coordinated properly, an injured employee should visit the doctors or urgent care facility within the MPN directory.  If an injury is simply first aid or could wait until the next to visit a doctor, set an appointment with doctor in the MPN directory.  If an injury is a significant and urgent, but non-life threatening like sprain, muscle strain, or small cuts, locate the closest urgent care facility within the MPN.  If it is a life threatening injury, go the nearest emergency room hospital.  If possible, go the emergency room within the MPN directory; it would easier to coordinate the medical care.

A Certificate of Insurance from Insurance Carrier/Insurance Broker that lists the facility owner or facility name as the named insured, address, insurance carrier, policy number, effective date and expiration date.  Also, Declaration Pages of the Policy would also provide proof of insurance.

Workers’ compensation rates depend on a few factors: classification code, payroll amount, history, and insurance carrier charges.  If your classification code for the industry as a whole has sustained major claim losses over the years, the based rate of the classification code would increase.  As an industry, you will pay higher rates.  Most of time, your individual workers’ compensation rate goes up because of several individual factors:  multiple claims, severity of claims and non-compliant audits.  If over time, you have multiple small claims or one large excessive claim, then you workers’ compensation rate will tend to be higher.  If you fail to complete your annual payroll audit, this could increase your individual rate too.

Workers' compensation rates depend on a few factors: classification code, payroll amount, history, and insurance carrier charges.  Assuming that your facility had workers’ compensation insurance for several years, no claims, same amount of payroll; and then your WC rates should be lower comparing to others.  Your experience-modification through the WCIRB (if qualified) should show a number less than 1.00 and the insurance carrier should apply their discounts.  These two factors should provide a lower overall rate for you.

A workers’ compensation audit is a normal process that helps an insurance carrier to verify the estimated payroll comparing to the actual payroll paid. The audit also verifies locations, classification codes, employee duties, and compensation arrangements. It is important to complete the audit because it provides reported premium to offset against losses on your WCIRB account.