THE answer is coldly and astoundingly, yes. All California employers must provide Workers’ Compensation benefits to their employees under California Labor Code Section 3700. If a business employs one or more employees, it must satisfy the requirement of the law.
First, what is workers compensation insurance? As the term implies, it’s a compensation plan for workers. It’s a policy that helps pay for injury or illness occurring in the workplace.
With poor and dangerous working conditions in the early 20th century, trade union movement demanded protection for the workers and their dependents against financial loss, in the event of injury, illness or death arising from the workplace.
The answer to remedy this outrage is the Workers’ compensation insurance program. Did you know it is the oldest social insurance program in the United States; (source insurance.ca.gov)? Older than social security and unemployment compensation.
With this policy, injured workers may be entitled to one or more benefits depending on the circumstances surrounding the injury or illness. There are five basic types of workers’ compensation benefits that include medical care, temporary disability benefits, permanent disability benefits, supplemental job displacement benefits, and death benefits.
With the economy as it is, it is tempting to skimp on this fixed expense. But failure to do so could result in the following:
- Stop order
The DLSE ( Division of Labor Standards Enforcement) has the authority to issue a stop order against a business that is operating without workers compensation.
- Jail time
Uninsured employer can face a misdemeanor punishable by either imprisonment in the county jail for up to one year
- Hefty fine
A fine double the amount of workers’ compensation premium that would have been equivalent to the premium needed to secure coverage during the illegally uninsured period (in an amount not less than $10,000). Additionally, the state issues penalties of up to $100,000 against illegally uninsured employers.
- Civil action
An employee can file a civil action against the employer in addition to filing a workers’ compensation claim.
- Additional out of pocket
Employers may also be liable to reimburse the Uninsured Employers’ Benefit Trust Fund (UEBTF). This fund is the one that handles and settles the workers’ compensation claims when the employer has no insurance to pay the compensation owed to the injured worker.
As you can see, the list of possible consequences is no joke. I would imagine this is so to double down on the emphasis on the urgency to put this policy in force.
Meanwhile, because of the whirlwind of what a businessperson usually juggles, from payroll, to hiring, managing day to day operation to name a few, it is easy to slip into putting this in the back burner. Also, to my surprise not a lot of employers are aware of the gravity of what it could mean to them if they are found to not have it.
You may have put your life savings in your business. Most entrepreneurs pour their “blood, sweat and tears” to make their dream of owning a business come true. Don’t skip this step. Protect your business with this insurance essential.
Penny wise and pound foolish is an idiom to consider when weighing on this expense. Economize in other matters, but in this case the consequence of not having it is too large to chance it.
The good news is, having coverage shouldn’t cost you an arm and a leg. Be wise by consulting with trusted insurance advisors to guide you on the coverage and carrier that is right for you.
You are an expert with what you do. On matters of insurance, let the insurance specialist handle this for you. You deserve to have the peace of mind especially with all the things that you put up to run your show. Put your insurance professional to work and let them handle the heavy lifting of shopping for the best rates for you.
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Melody Avecilla is an insurance expert. Her one-stop-shop agency has been a preferred go-to insurance resource for over a decade. She has a Masters in Business Administration from Loyola Marymount and earned her CLU (Chartered Life Underwriter) designation at The American College. Her team has been voted best in the industry for years in a row. Fun fact about her. She has multiple patents for the world’s first retractable high heels. In between work, she hosts a global leadership podcast called “dreamers to leaders.” She’s takes a hyper focused approach in elevating customer experience in running her businesses. Insurance is her flag ship enterprise.
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