When the employee is first treated by a health care provider for a workers’ compensation illness or injury, you must pay for the employee’s time. After the initial treatment, the employee is under the health care provider’s control. You are not required to pay for treatment-related absences from work. Unless the employee is on FMLA leave, you can require that the employee use paid time off (PTO), such as sick pay, for further physician’s appointments or physical therapy, provided that you make the same requirement for employees with non-industrial injuries. The employee can also choose to use PTO for this purpose.

Temporary Disability Benefits

An employee whose workers’ compensation claim has been accepted will receive temporary disability benefits from the claims administrator when the employee is off work and recovering from the effects of the injury.

• Temporary disability payments are calculated at two-thirds of the employee’s “average weekly earnings” up to a statutory maximum amount. The maximum amount is assessed yearly based upon a cost of living adjustment. The temporary disability payments for 2026 are increasing from 2025; the new maximum weekly payment is $1,764.11, while the minimum is now $264.61.

When determining workers’ compensation temporary disability benefits, the law requires that the benefit be based on the employee’s earning capacity, not at the actual wages earned in a particular workweek.

An employee’s earning capacity is reflected by his full-time, regular job before and after the injury. The earning capacity is a better measure of “average weekly earnings” than a low-paying or nominal payment for a temporary, short-term job. The law requires the benefit to be a reasonable representation of the employee’s average weekly earning capacity at the time of the injury, not the employee’s actual earnings on the day of the injury.1

An employee who is on a temporary assignment that pays a significantly lower wage who suffers a work-related injury must be compensated based on the average weekly earning capacity at the time of the injury. All sources of income must be considered to calculate a reasonable and fair amount for the workers’ compensation benefits.

A pilot program that allows employers — with written consent from the injured employee — to deposit indemnity (PD and TD) funds in a prepaid card account began in 2019 and has been extended to January 1, 2027. Reasonable access to in-network ATMs and necessary aggregate data must be provided to the Commission on Health and Safety and Workers’ Compensation upon request.2

State Disability Insurance (SDI) and Workers’ Compensation

Employees cannot receive workers’ compensation and SDI simultaneously unless the workers’ compensation rate is less than the SDI rate. If the workers’ compensation rate is less than the SDI rate, the employee receives the difference between the two rates as SDI. Employees don’t receive a combined total of the two benefits.

If the employee files for and receives SDI payments for the same period for which they also are receiving indemnity benefits from the insurance carrier, the Employment Development Department (EDD) will seek to recoup those SDI payments from the employee. The EDD, by statute, is entitled to the return of these monies.

The EDD will send the employer and/or insurance carrier a notice that the agency has begun payment of SDI payments and will ask the employer/carrier to fill in page 2 of the form as to whether the employer/carrier also is paying any indemnity payments. Failure to fill out and return this form to the EDD may make the employer liable for reimbursement to the EDD for the duplicate SDI payments if the EDD is unable to recover the payments from the employee.

Paid Family Leave (PFL) and Workers’ Compensation

An employee cannot use Paid Family Leave (PFL) for their own illness or injury. Therefore, an employee cannot receive PFL for a workers’ compensation injury. An employee can receive PFL while receiving workers’ compensation benefits when the PFL is filed for an unrelated covered injury/illness and the PFL benefit rate is higher than the workers’ compensation benefit rate. PFL will be expanded to include a designated person that is related by blood or the equivalent of a family relationship. This will go into effect on July 1, 2028.

Vacation, Sick Pay, PTO and Workers’ Compensation

Employees can receive payments for vacation, sick leave or PTO without affecting their eligibility for workers’ compensation payments.

You can require your employees to use vacation, sick pay and PTO during any type of disability leave, including workers’ compensation. If you do, create a written policy that requires your employees to use paid leave before taking unpaid or partially unpaid leave.

California employers are required to provide mandatory paid sick leave benefits under the Healthy Workplaces, Healthy Families Act of 2014. Retaliation or discrimination against an employee who requests or uses paid sick days is prohibited. An employee may file a complaint with the Labor Commissioner against an employer who retaliates or discriminates against an employee for exercising these rights.

• Agricultural employees who work outside are allowed paid sick days to avoid smoke, heat or flooding conditions created by a local or state emergency.3

At the time of publication, the Labor Commissioner has not provided guidance as to how mandatory paid sick days will be treated in relation to workers’ compensation leave. These mandatory paid sick days may be treated the same as optional, employer-provided sick days were treated in the past. In other words, you could have a policy requiring an employee to use the mandatory paid sick leave days before having unpaid or partially unpaid leave. Please continue to look for guidance from the state Labor Commissioner.

• If the employee is eligible for FMLA, you cannot require that individual to use vacation, sick pay or PTO during a FMLA leave that runs concurrently with the workers’ compensation disability. However, the employee can use accrued benefits to supplement workers’ compensation if you both agree to do so. If you are not covered by FMLA or the employee is not eligible for FMLA, you can require that the employee use any paid time off during any absences due to a work-related injury.

Permanent Disability Indemnity

After an employee has reached a permanent and stationary status, he or she may be entitled to permanent disability indemnity payments to compensate for the residual impairments. The length of time that permanent disability indemnity payments are made is dependent upon the extent of the impairment.

For injuries between January 1, 2005, and January 1, 2013, these weekly payments range from $187 to as much as $264.50, depending on the extent of the impairment and whether the employee was provided with a Return to Work Offer.

Employees injured on or after January 1, 2013, may receive weekly permanent disability up to $290, depending on the extent of impairment. The Return to Work incentives have been discontinued.

If employees have lost no time from work or are back to their regular job, weekly payment of permanent disability benefits can be deferred by the employer until the WCAB settles the claim or awards benefits.

The employee is not entitled to receive temporary disability payments and permanent disability payments on the same claim at the same time. Permanent disability payments are to begin within 14 days of the termination of temporary disability benefits.

The claims administrator is required to make an estimate of likely permanent disability and issue payments in accordance with that estimate until a final determination of the exact amount of permanent disability is made. Otherwise, the claims administrator needs to issue a “Notice of Delay of Permanent Disability Benefits” explaining what other information is needed to make that determination.

Continuing Benefits During Workers’ Compensation

The WCAB decided how long an employer must maintain health benefits for an employee on workers’ compensation leave. The WCAB ruled that employees on workers’ compensation leave are entitled only to the same continuation of group health benefits as employees on other types of disability leaves.

In Navarro v. A&A Farming, disabled employees’ health coverage continued for 90 days for both work and non-work-related absences. An employee with an industrial injury was told that his health benefits would end after 90 days unless he chose to extend those benefits under COBRA. The employee alleged discrimination under Labor Code section 132(a), arguing that he would have had continued coverage if not for his industrial injury.

The WCAB concluded that ERISA preempts state regulation of employee benefit plans, so the state cannot require an employer to provide health benefits to an employee it would not otherwise cover.4

If you have 50 or more employees (FMLA) or five or more employees (CFRA) and the employee is eligible for family medical leave, your employee maintains their health benefits for up to 12 weeks at the same level as if they were still at work. If you have fewer than 50 employees or the leave has expired, you can terminate the employee’s health benefits and send a Consolidated Omnibus Budget Reconciliation Act (COBRA) notice if:

• Your health plan is Employee Retirement Income Security Act (ERISA) qualified.
• You exceeded the benefits that your contractual agreement with your carrier provides.

If your plan is not ERISA qualified, you are not required by law to continue health insurance benefits. However, cases from the WCAB indicate that you must continue benefits as if the employee were still on the payroll.5 If you plan to terminate non-ERISA qualified health benefits for an employee on workers’ compensation, consult legal counsel first.

1. If your employee health plan is ERISA qualified, in your employee handbook, advise employees of the length of time that coverage remains in effect for any type of illness or injury.
2. Send a timely notice to the employee about their Cal-COBRA/COBRA rights after the continuation of health benefits expires.

In State Department of Rehabilitation v. WCAB, an employer required an injured employee who returned to work with a permanent injury to use sick leave or vacation time when he was absent for continuing medical treatment. The employee claimed that the company’s requirement constituted discrimination in violation of Labor Code section 132(a). The court ruled that he had no legal right to continued temporary disability benefits and his absences could be treated the same as absences for medical appointments for nonindustrial injuries.6

• The general rule is that to avoid being liable for a discrimination suit under Labor Code section 132(a), the employer needs to apply its policies equally across-the-board to employees off work for work-related injuries and to employees off work for non-work-related injuries or disability. To do otherwise risks a finding that the policy is being applied in discriminatory manner against injured workers, which is prohibited by Labor Code section 132(a).

For more information, see Employee Protection from Workers’ Compensation Discrimination.

A bill passed in 2022 makes permanent provisions of the Public Employees’ Retirement Law that provide to safety members of CalPERS who retire from industrial disability a retirement benefit paid through a CalPERS trust fund, equal to the greatest amount resulting from three possible calculations:7

• An actuarially reduced service retirement;
• A service retirement allowance if the member is qualified; or
• Fifty percent of their final compensation, plus an annuity purchased with their accumulated contributions, if any.

Family and Medical Leave

Federal and state laws require covered employers to provide time off to an employee for personal illness. Time off from work to recuperate from an industrial injury most likely qualifies employees for protection under the FMLA and the CFRA. Although some differences exist between the two laws, the leave provided by both laws runs concurrently for workers’ compensation purposes.

Employees are entitled to continued health benefits during FMLA leave if you provide those benefits under a group health plan. For more information on federal and state medical leave laws, see Family and Medical Leave.

If you fail to provide or delay providing notice of FMLA/CFRA coverage to the injured employee, the employee receives additional time off with job protection benefits above and beyond the period of workers’ compensation disability leave. Also, you may unwittingly violate the FMLA or the CFRA if you do not reinstate an employee following leave for a workers’ compensation injury that was not properly designated as FMLA.

1. County of San Joaquin v. WCAB, 147 Cal. App. 4th 1459 (2007)