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 in order to comply with the law.
One area where there seems to be confusion is when the practice is employing family members. The other question that comes up frequently is when your practice has independent contractors working in the practice.
The rules defining an independent contractor in the area of workers’ compensation can be different than just paying with a Form 1099 and providing no benefits, as you will see below. It is important to be sure you are complying with California law so the information below can help you determine if you may need this coverage.
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 law, she is considered an employee. An employee is defined as someone you engage or permit to work. Even though your niece is part of your family, she is still considered an employee 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? The Department of Workers’ Compensation in California defines an independent contractor differently than the IRS. The actual determination of whether a worker is an employee or independent contractor is best determined by applying the economic realities test, where the most significant factor to be considered is whether the person to whom service is rendered (the employer or principal) has control or the right to control the worker both as to the work done and the manner and means in which it is performed.
CAP Physicians Insurance Agency, Inc. intimately 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.