What happens if I don’t buy workers’ compensation insurance for my business?

  • #Ask Huck
  • Basics

There are quite a few consequences to going without workers’ comp, and none of them are good.

If you don’t get workers’ comp for your business, you could personally face fines and jail time. You could also be forced to stop employing workers. If an employee is injured while you’re uninsured, you will be liable for any bills related to the injury or illness and could even face a lawsuit in civil court.

Let’s go through some of these possible outcomes:

1) You could face fines and jail time.

If you hire employees in the state of California and do not purchase workers’ compensation insurance, the state considers you guilty of a criminal offense. (Yes, really. See section 3700.5 of the California Labor Code.)

That means they could charge you a fine of at least $10,000 (up to $100,000), put you in the county jail for up to a year, or both.

2) You could be forced to stop operating your business.

In some cases, the state will issue a “stop order,” which means that you will have to stop employing people until you purchase workers’ compensation insurance for your business.

3) You could be stuck paying a huge stack of medical bills.

Among other things, workers’ comp covers an employee’s medical bills if they are injured on the job. But if your employee gets injured at work and you don’t have workers’ compensation coverage?

Yep. You’ll be paying for all of those bills.

4) You could be sued by your employee.

If you don’t have workers’ compensation coverage at the time of a workplace injury, your employee has the legal right to file a personal injury claim against you in civil court. And, since there’s no financial cap on these claims in the state of California, the cost of the settlement can be pretty hefty.

In the end, going without workers’ compensation insurance is a huge financial risk with very little upside. (The good news? If your California business is uninsured, you can fix the situation in less time than it takes to make coffee.)

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All content on this page is for general informational purposes only and does not apply to any specific case, is not legal, tax or insurance advice and should not be relied upon. If you have any questions about the situation for your small business or the latest information in your state, you should contact an attorney for legal advice, an insurance agent or broker, and/or your state's labor or industry agency, board, commission or department. Please note that the information provided on this page may change at any time as a result of legislative action, court decisions or rules adopted or amended by any state or the federal government.