California Changes The Rules About Executive Officers and Workers Comp

California, land of startups and economic unicorns has changed the rules about executive officers, partners, and LLC members, among others, who get automatically included for Workers Comp purposes. This means that a powerful potential has been created for some companies to get into hot water about failing to provide Workers Comp insurance when the (revised) law says they must.

All California employers must provide Workers’ Comp benefits (which usually means having to buy insurance) once the business has one or more "employees"

What sometimes trips up some employers is, "who's an employee, for Workers Comp purposes?"

In California, the definition includes “every person in the service of an employer under any appointment or contract of hire or apprenticeship, express or implied, oral or written, whether lawfully or unlawfully employed.” Now the list has been expanded to include corporate officers, directors and working partners, by narrowing the definition of an excluded employee and requiring that a written waiver (under penalty of perjury) be filed in order to opt out.

The new law excludes an officer or member of the board of directors of a private or quasi-public corporation from the definition of an employee only if he or she owns at least 15% of the corporation’s issued and outstanding stock and executes a written waiver of rights stating under penalty of perjury that the individual is a qualified officer or director. 

It similarly excludes a general partner of a partnership or a managing member of a Limited Liability Company who executes a similar waiver. A waiver of coverage is effective upon the date of receipt and acceptance by the insurer and remains effective until it is withdrawn in writing. 

So it's really important that California employers double check their current programs to make sure they are covering everyone the new law requires to be covered, and to file any waivers that need to be filed to exclude those they wish to exclude (and who qualify under the new law.)