Every year, California contractors get caught working without the required insurance. The consequences range from annoying to catastrophic — stop work orders, fines, license suspension, and personal financial ruin if someone gets hurt. Here's exactly what's at stake.
Working Without Workers Comp (Required If You Have Employees)
California Labor Code Section 3700 makes workers compensation mandatory for any employer. Getting "caught" can happen several ways: a Cal/OSHA inspection, an injured employee filing a claim, a competitor reporting you, or a GC auditing your certificates of insurance.
- Civil fine: $1,500 per employee per day without coverage (Labor Code 3722). Three employees caught after 10 days = $45,000 in fines.
- Criminal charges: Willful failure to secure workers comp is a misdemeanor under Labor Code 3700.5 — up to $10,000 and one year in county jail for a first offense; felony for subsequent violations.
- Personal liability: If an employee is injured and you have no workers comp, you pay all medical bills, wage replacement, and disability costs out of pocket — with no limit.
- CSLB consequences: Lapsed workers comp (or failure to file an exemption) can suspend your license.
Working Without General Liability
GL is not legally required by California law for contractors — but many cities require proof of it before issuing a building permit. The real risk is financial: if you cause property damage or bodily injury with no GL, you pay the claim personally. A homeowner slip-and-fall on your job site, an accidental fire during work, or a third-party injury caused by your subcontractors can each run well into six figures. If you're a sub working without GL and cause damage, the GC pays the claim first and then sues you to recover — even if you're a sole proprietor.
Working Without the CSLB Bond
The $25,000 contractor license bond is required for every CSLB licensee. If your bond lapses, CSLB automatically suspends your license within days. Working with a suspended license is illegal contracting under Business & Professions Code 7028 — a misdemeanor punishable by up to six months in jail and a $5,000 fine, escalating to a felony for repeat offenses. CSLB conducts random audits, and homeowners can check your license status online at any time.
The Lapse Problem
Coverage lapses happen for mundane reasons — a missed payment, a wrong address for the renewal notice, or a policy non-renewed by the carrier. But a lapse on your record makes future coverage more expensive and harder to get; some carriers decline to write contractors who've had a lapse in the past three years. The fix is simple: set up auto-pay, make sure your broker has a current email for renewal notices, and work with someone who actively tracks your renewal dates.
What to Do If You're Currently Uninsured
Don't panic — get covered immediately. We can often bind coverage the same day or next day. A prior lapse doesn't necessarily disqualify you; we have markets for it. If Cal/OSHA has issued a stop work order, you'll need to show proof of active coverage to lift it. Call us first: (858) 367-0782.
Frequently Asked Questions
Yes. Cal/OSHA inspections, an injured employee filing a claim, a competitor reporting you, or a GC auditing your certificates of insurance can all expose a lapse. Once discovered, a stop work order can be issued immediately.
California law doesn't require workers comp for sole proprietors with no employees. You still need your $25,000 CSLB contractor license bond, and most GCs will require proof of GL and a workers comp exemption waiver before letting you on a job site.
California Labor Code 3722 allows a penalty of up to $1,500 per employee per day without coverage. Willful failure to secure workers comp is also a misdemeanor under Labor Code 3700.5, punishable by up to $10,000 and a year in county jail for a first offense, escalating to a felony for repeat violations.
Yes, and you should move immediately. We can often bind workers comp coverage same day or next day. Once you can show proof of active coverage, the stop work order can typically be lifted.
Your license can be suspended if your $25,000 contractor license bond lapses, or if you fail to maintain workers comp (or file a valid exemption) as required by CSLB. Working with a suspended license is illegal contracting under Business & Professions Code 7028.