What is California Labor Code Section 3700 and How Does it Secure Payments of Compensation?

California Labor Code Section 3700 protects the security of compensation payments for all employees. This code states that every employer, except the State and the political subdivisions of it, must ensure the payment of compensation to its employees in at least one of three ways. Here’s everything you need to know about California Labor Code Section 3700: Securing Payment of Compensation.

An employer can either be traditionally insured against liability through an authorized insurer in the state, self-insure, or join with other employers to self-insure the group. All options are available to an employer but every employer must be held responsible for their employee’s payment of compensation.

How Does an Employer Become Self-Insured

An employer may choose to become self-insured rather than obtain insurance through a state-authorized insurer or a group of insurers. To comply with California Labor Code and to be financially responsible for their worker’s compensation, an employer must apply to the Director of Industrial Relations for a certificate of self-insurance. Here is everything an employer needs to complete in order to successfully become self-insured:

  1. The employer must apply to the Office of Self-Insurance Plans (OSIP) for approval of self-insurance.
  2. The OSIP will review the application and strictly look at the employer’s financial strength, their proposed benefit delivery system, and their suitability to participate in self-insurance.
  3. The OSIP will make a decision on the application within 21 days of submission and will notify the applicant on whether or not they will be granted a certificate of self-insurance.

An employer can learn more detailed information about the requirements the OSIP will be looking for within financial security, benefit deliveries, and suitability by visiting the California Department of Industrial Relations website that describes more about how they can become self-insured.

Requirements of Employees to be Covered by Worker’s Compensation Insurance

An employee may fear that they are not covered under their employer’s worker compensation insurance, however, this is usually not the case. Every employer is required to provide a means of payment for their worker’s compensation liability.
There is no requirement for an employee to be full-time or tenured in order to receive worker’s compensation insurance from their employer. California worker’s compensation laws will cover just about any injury sustained by an employee hired in-state, or who regularly works in California, even if the injury was sustained out-of-state.

An employee is entitled to sue their employer for damages if the injury results from specific types of intentional or egregious conduct, or if the employer does not have any worker’s compensation insurance.

Related: California Workers’ Compensation Laws

How to Report an Employer Not Carrying Workers Compensation Insurance

To report an employer for not obtaining the mandatory worker’s compensation insurance, an employee can contact their local Labor Commissioner’s Office to file a claim. An employee can find the contact information of their Local Labor Commissioner’s Office here and directly contact them to file a claim.

Violations of California Labor Code Section 3700: Securing Payment of Compensation

An employer can face severe legal and financial consequences if they fail to be responsible for the compensation payment of their employees. Failure to comply with this code is a criminal offense and is considered a misdemeanor. This is punishable by imprisonment in the county jail, a fine up to $10,000, or in some cases, both.

Failure to have compensation insurance as an employer is also a serious issue. If an employer does not possess compensation insurance, California Labor Code 3700 prohibits the use of any employee labor until such coverage is obtained. The continued use of labor without appropriate compensation insurance by the employer will also result in imprisonment in the county jail up to 60 days and/or a fine up to $10,000. Additionally, the Division of Labor and Standards Enforcement will enforce a financial penalty of $1,000 per employee on payroll when the stop order is issued and served, up to $100,000.

Moreover, employers who are not insured can face a fine of up to $100,000 as well as responsibility for any other financial costs that the injury may have caused the employee.

Finally, any injured worker is entitled to file a worker’s compensation claim as protected by the California Labor Code. If the claim is reviewed by the Workers Compensation Appeals Board and it is found that the employer did not have the mandatory insurance, the employer may face additional consequences even after the dispute is settled. They can be fined $10,000 per employee on payroll at the time or $2,00 per employee if the case was non-compensable, up to $100,000.

Related: Workers’ Compensation: File and Prove a Claim

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