If you’re a contractor in California, carrying workers’ compensation insurance is not optional — it’s required by law. Yet some contractors still try to operate without it to reduce costs.
That decision can destroy your business.
In this guide, we explain exactly what happens if a contractor doesn’t carry workers’ comp in California — including fines, license suspension, stop-work orders, and personal liability.
Is Workers’ Compensation Mandatory for Contractors in California?
Yes.
Under California law, all employers must carry workers’ compensation insurance if they have one or more employees. This requirement is enforced by the California Department of Industrial Relations.
Additionally, licensed contractors are regulated by the California Contractors State License Board (CSLB), which requires proof of workers’ compensation coverage if you employ workers.
Even if you only have one employee — coverage is mandatory.
What Happens If You Don’t Carry Workers’ Comp?
Here’s what contractors risk when operating without workers’ compensation insurance:
1️⃣ Stop-Work Orders
If state investigators discover you’re uninsured:
- Your job site can be shut down immediately
- Projects may be delayed or canceled
- Revenue can stop overnight
2️⃣ Heavy Financial Penalties
California penalties may include:
- Up to $10,000 per employee
- Additional penalties up to $100,000
- Criminal misdemeanor charges
Penalties increase if the violation is considered willful.
3️⃣ License Suspension
The CSLB can:
- Suspend your contractor license
- Revoke your license
- Deny license renewal
Without an active license, you legally cannot operate in California.
4️⃣ Personal Liability for Workplace Injuries
This is the biggest risk.
If an employee gets injured and you don’t have workers’ comp insurance:
- You must pay medical bills out of pocket
- You may owe lost wages
- You may face civil lawsuits
- Attorney’s fees may apply
Serious construction injuries can exceed hundreds of thousands of dollars.
Without insurance, those costs fall directly on you.
5️⃣ Lawsuits Outside the Workers’ Comp System
Normally, workers’ comp protects employers from employee lawsuits.
But if you are uninsured:
- Injured employees may sue you directly
- Pain and suffering damages may apply
- Jury trials become possible
This creates unlimited liability exposure.
“What If My Workers Are Independent Contractors?”
Under California’s ABC test, most workers performing core construction services are legally employees — even if paid as 1099 subcontractors.
Misclassification does not eliminate your responsibility.
If an injury occurs and the worker is legally determined to be an employee, you can still face penalties and personal liability.
Why This Is Especially Risky in Construction
Construction remains one of the highest injury-rate industries due to:
- Falls from heights
- Equipment accidents
- Electrical hazards
- Heavy machinery
- Structural collapses
One serious injury can bankrupt an uninsured contractor.
Can You Ever Legally Operate Without Workers’ Comp?
Limited exceptions may apply:
- Sole proprietors with no employees
- Certain corporate officers with filed exemptions
However, once you hire even one employee, coverage becomes mandatory.
Protect Your License. Protect Your Business.
Operating without workers’ comp insurance in California is one of the fastest ways to:
- Lose your contractor license
- Face lawsuits
- Accumulate massive debt
- Shut down your company
Compliance is not just about legality — it’s about survival.
Work With a Local California Contractor Insurance Specialist
At Independence Insurance Center, we specialize in contractor insurance throughout California.
We help contractors:
- Obtain workers’ compensation policies
- Review payroll classifications
- Prepare for audits
- Reduce long-term premium costs
- Stay compliant with CSLB requirements
📍 Visit Our Office:
Independence Insurance Center
13902 Harbor Blvd Unit 2A
Garden Grove, CA 92843, United States
📍 View us on Google Maps:
https://maps.app.goo.gl/NYrVStsMMxKcQaNu5
📞 Call us today at (714) 775-3400 for a confidential consultation.
If you’re operating in Orange County, Los Angeles County, or anywhere in California, we’re here to help protect your license and your livelihood.
