Whether you have a family-owned or small business in California, there are certain laws and requirements regarding workers’ compensation insurance that business owners have to follow and comply with.
Here at the Koszdin, Fields & Sherry law firm, our best workers compensation attorneys in Los Angeles have recently received the following question from one of our readers, Sean.
“My wife and I own a small business in California. We did not hire any employees, but our son regularly helps us out. Sometimes he works full days, and other times he works night shifts. Not long ago, he nearly slipped and fell at our office, but luckily, he did not get hurt in the accident. Although nothing bad happened, I and my wife have begun to wonder what would happen if our son did get hurt at the office? How would he be compensated for his on-the-job injuries? Are we supposed to carry workers’ compensation insurance for him or herself? Thanks. Sean.”
Are family members classified as ‘employees’ when working for you?
Thank you for your question, Sean. First and foremost, yes, you do need to carry workers’ compensation insurance for your son, because California’s law recognizes him as your employee. Since you arranged to have your son do work for your business, he is legally classified as your employee.
Under California law, small business owners with at least one employee are required to have workers’ comp insurance. Just because your son is part of your family, it does not mean that he gets some special status when working for you. Therefore, treat your son and other family members who work for you the same way that you would treat someone hired through a traditional job application process.
Can family members be classified as independent contractors?
I know what you are thinking right now. “Is it possible to avoid carrying workers’ compensation insurance if we formally classify our son as an independent contractor?” Our Los Angeles workplace injuries attorney at the Koszdin, Fields & Sherry law firm says that while it is true that you do not need to carry workers’ comp insurance for independent contractors, under your circumstances, your son would probably not qualify as an independent contractor. California law uses a very specific definition of the term “independent contractor” and takes into account many factors to distinguish the difference between employees and independent contractors. The non-exhaustive list of these factors is as follows:
- The degree of permanence of the working relationship between the worker and employer;
- The method of payment (by time or by job);
- The amount of control the employer has over the worker;
- Whether or not the work is part of the employer’s regular business;
- Whether or not the worker works for other businesses;
- And many more.
More likely than not, your son should be classified as your employee rather than an independent contractor because he is working at the office under your supervision. Also, be warned that misclassifying your employees as independent contractors bear the penalty of 1.5 percent of the wages paid.
Penalties for not carrying workers’ comp insurance in California
Your failure to carry workers’ comp insurance for your employees could also get you in trouble with the law, says our experienced workplace injuries attorney in Los Angeles. By failing to comply with California’s law regarding workers’ comp insurance, you expose yourself to potential fines and even misdemeanor charges. More often than not, employers who do not carry workers’ comp insurance have to pay a fine of $1,500 per employee or twice the amount you would have paid in insurance premiums, whichever is more.
To answer the second part of your question, whether or not you and your wife, as business owners, need to have workers’ comp insurance for yourself depends on whether your business is a sole proprietorship, a partnership, or a limited liability company (LLC). Speak to our Los Angeles workplace injuries attorney at the Koszdin, Fields & Sherry law firm to make this determination and find out more about the legal requirements for carrying workers’ comp insurance in California.