Workers' compensation insurance
California makes every employer carry workers' compensation, even with one employee, and CSLB will not keep your license active without proof on file. The exam tests who must carry it, how to secure it, what happens when it lapses, and the deadlines for reporting an injury.
Workers' compensation (often called “workers' comp”) is insurance that pays benefits to employees who get hurt or sick because of work. On a job site, one fall or one cut can cost more than a whole project earns. That is why the law, CSLB, and the exam all treat workers' comp as a basic condition of doing business.
What workers' comp is and why it matters
Benefits include medical care, temporary disability, permanent disability, a supplemental job displacement benefit, a return-to-work supplement, and death benefits. The system is no-fault: the injured worker does not have to prove the injury was anyone's fault to get benefits.
In exchange, workers' comp is normally the employee's exclusive remedy against the employer. The exclusive remedy rule means that, when the employer is properly covered, the injured employee generally cannot sue the employer for damages (Labor Code §3602). An uninsured employer loses this protection.
Who must carry it
Labor Code §3700 says every employer except the state must secure the payment of compensation. CSLB puts it plainly: employers must carry workers' comp even if they have only one employee. An “employee” includes minors and people who are not U.S. citizens, whether they are lawfully or unlawfully employed (Labor Code §3351).
Be careful with “subs” who are really workers. Under Labor Code §2750.5, a worker doing work that requires a contractor's license, or working for someone who needs a license, is presumed to be an employee, not an independent contractor. The hiring contractor must prove otherwise.
Know this
One employee = workers' comp required. A worker doing licensed construction work is presumed to be an employee.
Ways to secure coverage (Labor Code §3700)
| Method | How it works | Proof CSLB accepts |
|---|---|---|
| Buy a policy | Insured by a company authorized to write workers' comp in California, including the State Compensation Insurance Fund (State Fund) | Certificate of Workers' Compensation Insurance, filed by the insurer |
| Self-insure | Certificate of consent to self-insure from the Director of Industrial Relations, after proving ability to pay claims | Certification of Self-Insurance, issued by the Director of Industrial Relations |
State Fund is a state-created insurer that must be an available market for all California employers. It competes with private insurers; it is not a separate “third way” in the statute, but a common exam answer choice for where to buy a policy.
What CSLB requires on file (through December 31, 2027)
Under B&P Code §7125, an active license needs one of these on file at all times, in the business name: a Certificate of Workers' Compensation Insurance, a Certification of Self-Insurance, or an exemption certificate. An exemption certificate is a signed statement that you employ no one in a way that makes you subject to California's workers' comp laws.
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