The component is not available at this moment. Please contact the site administrator.
Failure to maintain workers’ compensation coverage can result in:
An injured employee of an uninsured employer is provided access to an expedited hearing calendar for his or her workers’ compensation claims.2 This means that a hearing will be held within 30 days to adjudicate the issue.
An injured employee can also sue you in civil court for damages if you are uninsured. You are presumed negligent. You cannot turn to common law defenses, such as contributory negligence or assumption of risk. The employee often attaches your property to a lawsuit to satisfy any damages awarded and attorneys’ fees.
The DIR, upon receiving and investigating a claim of uninsurance, can prohibit you from operating until you secure coverage; prosecute you if you fail to comply with a stop order; and fine you up to $10,000 per employee.3
Even a brief lapse in coverage that is subsequently corrected can result in significant penalties. In Leo’s Associates, Inc. v. Department of Industrial Relations, an employer was warned that its workers’ compensation insurance would be canceled on a given date due to failure to file payroll reports and premiums. The payroll reports and premiums were brought up to date six weeks later. The insurer furnished a letter stating that it withdrew the cancellation and confirmed coverage without lapse. However, before the letter was received, a deputy labor commissioner conducting a workplace inspection asked to see proof of workers’ compensation coverage. When company officials could not provide proof of coverage, a stop order was issued and an $18,000 penalty levied against the employer.
The company appealed the penalty, arguing that the insurer reinstated coverage retroactively. The court upheld the penalty because at the time of inspection, the coverage was not in effect.4
Section 7028.7 of the Business and Professions Code has been amended to increase minimum civil penalties from $200 to $1,500. The minimum civil penalties will also adjust for inflation every five years. These amendments will go into effect July 1, 2026.5
1. Lab. Code sec. 3722 (a)
2. Lab. Code sec. 5502(c), effective January 1, 2015
3. Lab. Code secs. 3707, 3708, 3710.1, 3710.2, 3722(d)(2)
4. Leo’s Associates, Inc. v. Department of Industrial Relations, 120 Cal. App. 4th 628 (2004)
5. Business and Professions Code 70287.7