California Workers’ Compensation Insurance and the New California Law About Employees

California law requires employers to have workers’ compensation insurance for their employees. CAP Physicians Insurance Agency, Inc. frequently runs into two main questions about whether our members need to carry workers’ compensation insurance coverage to comply with state law.

One area where there seems to be confusion is when the practice employs family members. The other area that comes up frequently is when your practice has independent contractors working in the practice.

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Insurance FAQs

Do I need to have workers’ compensation insurance?
California law requires employers to have workers’ compensation insurance even if they only have one employee. Every California employer using employee labor, including family members, must purchase workers’ compensation insurance. If you fail to provide workers’ compensation insurance the fines and penalties are significant costing you up to $10,000 per employee with a maximum of $100,000.

My niece helps in my practice for a few hours a day, but I do not consider her an employee. Is that correct?
No. Under the new California law, she is likely considered an employee. California Labor Code section 2750.3(a) now defines an employee as “a person providing labor or services for remuneration shall be considered an employee rather than an independent contractor unless the hiring entity demonstrates that all of the following conditions are satisfied:
(A) The person is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact;
(B) The person performs work that is outside the usual course of the hiring entity’s business; and
(C) The person is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.”
So, unless your niece performs work that does not involve clerical or health care services for your practice (such as painting your office walls), she is still considered an employee even though your niece is part of your family, and you must provide workers’ compensation insurance.

My practice employs persons classified as independent contractors in my practice. What obligations do I have to purchase workers’ compensation insurance?
It depends. If the person classified as an independent contractor in your practice is a physician, dentist, podiatrist, or psychologist, then the new California law does not change prior law. All other persons classified as independent contractors in your practice are employees under the new California law unless you can demonstrate that all of the following conditions are satisfied:
(A) The person is free from your control and direction in connection with the performance of the work, both under the contract for the performance of the work and in fact;
(B) The person performs work that is outside the usual course of your practice; and
(C) The person is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.

CAP Physicians Insurance Agency, Inc. understands medical practice challenges – and how to insure against those challenges most cost effectively. We are a full-service agency with knowledgeable professionals who can answer your questions and help you find the best solutions for your insurance needs.

We are always looking for ways to save our members money, so if you need to purchase coverage or would like us to get you a competitive quote for insurance you already have, call us at 800-819-0061 and press 1, or send us an email at CAPAgency@CAPphysicians.com.