California Workers Compensation Exemptions

In California, most business owners are required to have workers’ compensation insurance, but there are exceptions. Some business owners can choose to be excluded from workers’ compensation coverage, but only if they meet certain criteria. So, who can choose to be excluded? The following groups of people may be eligible for California Workers Compensation Exemptions:

• Officers and board members of a corporation
• Owners of a professional corporation
• General partners in a business
• Managing members of a limited liability company (LLC)

However, just because someone falls into one of these groups does not automatically mean they qualify for the exemption. Corporate officers, for example, need to check specific rules in the California Labor Code, Sections 3351 and 3352, to make sure they meet the requirements. These rules cover details like the percentage of ownership in the company, relationships to family members in the business, and certain trust-related guidelines.

If you’re a business owner and you’re not sure whether you qualify for the exemption, your insurance agent can help guide you. However, they cannot give legal advice. If you have any doubts about your eligibility, it’s a good idea to talk to an attorney.

How to Apply for Exclusion

If a business owner wants to exclude themselves from workers’ compensation, they must fill out a form called an “affidavit” to officially request the exclusion. This form needs to be submitted to the state through the Workers’ Compensation Rating and Insurance Bureau (WCRIB). Some insurance companies might help with submitting the form for you, but it is ultimately the business owner’s responsibility to make sure it gets filed correctly.

Reporting Ownership Changes

California law requires business owners to report any change in ownership to WCRIB. This must be done through the WCRIB Connect system, which is an online tool that makes the process easier. Even if the change in ownership isn’t very important, it still needs to be reported. Keep in mind that changes in ownership percentage can affect a business’s experience modification rate (EMR), which helps determine your workers’ compensation insurance premiums.

Payroll and Workers’ Compensation Rates

For business owners who are included in workers’ compensation coverage, there are specific rules for calculating payroll. The minimum payroll for included owners is $54,600, and the maximum payroll is $139,200. However, 10% of their payroll must be assigned to the clerical class code 8810. This means the company will calculate some of the owner’s payroll as though they are doing office work, which may affect the premium.

Changing Exemption Status

If a business owner decides they no longer want to follow the default California Workers Compensation Exemption rules, they must make this known when they fill out the Acord 130 application. This signed application is sent to the insurance company, which will then file it on behalf of the business owner. Make sure the correct paperwork is submitted to ensure you are following the rules properly.

In summary, California allows certain business owners to opt out of workers’ compensation insurance, but only under specific conditions. It’s important to follow the rules carefully and file the necessary forms. If you’re unsure about your eligibility or how to proceed, consult your insurance agent or an attorney.