What a workers' comp exemption is for a California contractor

A workers' compensation exemption is a signed statement a licensed California contractor gives the Contractors State License Board (CSLB) certifying that he or she has no employees, in place of the certificate of workers' compensation insurance that is otherwise required to hold an active license. CSLB describes the rules on its workers' compensation requirements page.

CSLB says an active licensee, or an applicant for an active license, must do one of two things: give CSLB a valid certificate of workers' compensation insurance or certification of self-insurance, or give CSLB a signed exemption certifying no employees at this time. CSLB cites Business and Professions Code §7125 as the source.

The exemption is not available to everyone. CSLB says you cannot file it if you employ anyone in a manner subject to California workers' compensation laws, if your license is qualified by a Responsible Managing Employee (RME), or if you hold a C-8 Concrete, C-20 Warm-Air Heating, Ventilating and Air-Conditioning, C-22 Asbestos Abatement, C-39 Roofing, or C-61/D-49 Tree Service classification. Active holders of those classifications must carry workers' compensation insurance or a certification of self-insurance whether or not they have employees.

When you hire, the exemption stops being valid. CSLB says that once you employ anyone subject to the workers' compensation laws, the exemption on file is no longer valid and proof of coverage must reach CSLB within 90 days of the hire. CSLB also says coverage must be continuous: failing to maintain it results in license suspension, and work done while the license is suspended is treated as unlicensed work. The exemption also does not change the employer rule in Labor Code §3700, which the California Department of Insurance describes as requiring employers to provide workers' compensation insurance for their employees. See workers' comp exemption for California contractors and workers' compensation.