Short answer: An employer who knew, or should have known, it had to carry workers' comp and didn't commits a misdemeanor punishable by up to one year in county jail, a fine of up to double the premium that would have been due (at least $10,000), or both (Labor Code §3700.5). The state can also issue a stop order with a penalty of $1,500 per employee (§3722(a)), and larger penalties apply if an employee files a claim while you're uninsured.
Penalties at a glance
| Penalty | Amount | Source |
|---|---|---|
| First criminal conviction | Up to 1 year in county jail and/or a fine of up to double the unpaid premium, not less than $10,000 | Labor Code §3700.5(a) |
| Second or later conviction | Up to 1 year and/or triple the unpaid premium, not less than $50,000, plus investigation costs | §3700.5(b)-(c) |
| Stop order penalty | $1,500 per employee employed when the order is served | §3722(a) |
| Uninsured more than one week in the prior calendar year | The greater of twice the premium that would have been paid or $1,500 per employee | §3722(b) |
| After a claim is adjudicated | $2,000 per employee (noncompensable cases) or $10,000 per employee (compensable cases) | §3722 |
| Cap | $100,000 for penalties other than §3722(b) | §3722(f) |
A stop order under Labor Code §3710.1 bars the use of employee labor until coverage is secured. Penalties go to the Uninsured Employers Fund.
Beyond the penalties
An uninsured employer can also be on the hook for the injured worker's benefits. The state's Uninsured Employers Benefits Trust Fund may pay the worker and then seek reimbursement from the employer.
How to stay compliant
- Bind coverage before your first hire, including part-time and family employees who aren't exempt.
- Watch for cancellation notices. A lapse for nonpayment leaves you uninsured.
- Post the required notice with your insurer's information at the workplace.
Related: what happens if workers' comp lapses in California and who is exempt from workers' comp in California.
Frequently asked questions
What is the penalty for not having workers' comp in California?
It's a misdemeanor punishable by up to one year in county jail and a fine of up to double the unpaid premium, at least $10,000 (Labor Code §3700.5), plus administrative penalties such as $1,500 per employee with a stop order (§3722).
What is a stop order?
An order under Labor Code §3710.1 that stops an uninsured employer from using employee labor until it secures workers' comp coverage.
Are penalties higher if an employee is injured?
Yes. After a claim is adjudicated, the penalty is $2,000 per employee in noncompensable cases or $10,000 per employee in compensable cases (§3722).
Is there a maximum penalty?
Penalties under §3722 other than subdivision (b) are capped at $100,000 (§3722(f)). Criminal fines under §3700.5 are separate.
Alishahi Insurance · 439 N Canon Dr, Penthouse, Beverly Hills, CA 90210 · (877) 711-4545 · CA License #4348151. General information only. Not legal, tax or financial advice, and not a coverage determination. Coverage depends on policy language and underwriting, and rules vary by state.