Do California Contractors Need Workers' Comp? CSLB Rules Explained

If you are a California contractor, workers' compensation is not optional once you have employees. However, for certain CSLB license classifications, it is required even if you do not have employees. You may see this coverage written a few different ways: workers' compensation, work comp, or just WC. In everyday use, they all refer to the same thing: the employer's coverage for job-related employee injuries and illnesses. In this guide, we will use "workers' comp" for short.

Understanding these rules is critical. A mistake here can hold up a new license application, create renewal problems, or lead to an immediate license suspension if your coverage lapses.

This guide is written for two groups:

• Applicants: Learn what CSLB needs on file before they can issue your license.
• Current licensees: Learn how to stay compliant, avoid suspension, and fix common filing mistakes.

Important Update: The universal requirement for all licensees to carry workers' comp regardless of whether they have employees has been delayed until January 1, 2028.

Quick Answer: Do You Need Workers' Comp?

The answer depends on your staff and your license classification.

• Yes, if you have employees. California requires employers to carry workers' compensation insurance even if they have only one employee, including part-time staff.
• Yes, if you hold specific CSLB classifications. Even with zero employees, you generally cannot be exempt if you hold a C-8, C-20, C-22, C-39, or C-61/D-49 classification.
• Maybe, if you have no employees. CSLB allows a workers' comp exemption for many trades, as long as you meet the exemption requirements.

Warning: If you file an exemption and later employ anyone subject to California workers' comp laws, your exemption no longer applies. You must obtain a policy and submit proof to CSLB within the required timeframe (usually 90 days from the policy's effective date), and then continuously maintain coverage.

The "One Decision" Compliance Check

CSLB treats workers' comp as a straightforward compliance checkpoint. Use this logic flow to determine what you need on file.

Step 1: Do you have any employees?

(This includes part-time employees and employed relatives.)

• Yes: You need workers' comp coverage. CSLB expects a current and valid Certificate of Workers' Compensation Insurance (or Certification of Self-Insurance).
• No: Go to Step 2.

Step 2: Do you hold a mandatory classification?

Does your license include C-8, C-20, C-22, C-39, or C-61/D-49?

• Yes: You must file proof of workers' comp coverage even with no employees. You generally cannot file an exemption.
• No: Go to Step 3.

Step 3: File a CSLB Exemption

If you have no employees and do not hold a mandatory classification, you must file a Workers' Comp Exemption to document your status.

What Workers' Comp Covers (And What It Does Not)

Workers' compensation is a no-fault system designed to (1) help limit employer liability and (2) provide prompt medical treatment and defined benefits for job-related injury or illness.

Workers' comp typically covers:

• Medical treatment related to workplace injury or illness.
• Wage replacement benefits (indemnity) when an employee loses work time.
• Other defined benefits in certain cases (temporary disability, permanent disability, death benefits).

Workers' comp does not replace other insurance. It generally does not cover:

• Property damage to a client's home caused by your work.
• Third-party injuries (customers, homeowners, bystanders).
• Construction defects, rework, contract disputes, or warranties.
• Tool theft, vehicle damage, or equipment losses.

Note: Those risks are usually handled by policies like General Liability, Commercial Auto, and Inland Marine (tools/equipment coverage).

Who Must Carry Insurance Even With No Employees?

Most contractors only think about workers' comp once they hire their first employee. However, CSLB is stricter for a small set of higher-risk classifications. If you hold any of the classifications below, you generally cannot use an exemption, even if you have no employees:

• C-8: Concrete
• C-20: Warm-Air Heating, Ventilating and Air-Conditioning (HVAC)
• C-22: Asbestos Abatement
• C-39: Roofing
• C-61/D-49: Tree Service

Bottom line: If you hold one of these classifications, treat workers' comp as "always required," even if you are a one-person operation. CSLB can block key license actions if you do not have valid proof on file.

The 2028 Timeline: Clearing the Confusion

You may have heard, "Every contractor needs workers' comp starting in 2026." That was the original direction under SB 216, but it changed.

What changed?

CSLB published guidance delaying the "all licensees regardless of employees" requirement from January 1, 2026 to January 1, 2028.

What this means for you

• Until January 1, 2028: Licensees in trades other than the mandatory list (C-39, C-8, C-20, C-22, D-49) can continue to claim exemptions if they have no employees.
• Preparation: CSLB is using this delay to build a stronger system to verify that exempt contractors are telling the truth.
  • Audit your subcontractors: Ensure anyone you hire is a legitimate, licensed subcontractor. If you treat them like employees (controlling their hours/work), CSLB may flag you during this verification ramp-up.
  • Watch your status: If you hire even one helper before 2028, you must drop the exemption immediately.

Filing the Exemption (And When Not To)

If you do not have employees, CSLB allows you to file a formal certification, under penalty of perjury, that you do not employ anyone subject to California workers' comp laws.

You can file a workers' comp exemption only if all of the following are true:

• You have no employees subject to California workers' comp laws.
• You do not hold a mandatory classification (C-8, C-20, C-22, C-39, or C-61/D-49).
• Your qualifier is not a Responsible Managing Employee (RME).
• Your license is active (do not submit an exemption for an inactive license).

The 90-Day Trap

Filing an exemption is not "set it and forget it." As soon as you employ anyone subject to California workers' comp laws, you must obtain a policy and submit proof to CSLB within the required timeframe (the exemption language points to 90 days of the policy's effective date), then continuously maintain coverage.

Workers' Comp vs General Liability

A common confusion among new contractors is the difference between these two insurance types.

What to Submit So CSLB Can Issue Your License

Before CSLB can issue a new license (or reinstate, reactivate, or renew an existing one), they expect one of the following on file, depending on your situation:

1. Certificate of Workers' Compensation Insurance (most common)
2. Certification of Self-Insurance (less common)
3. Workers' Comp Exemption (only if eligible and you truly have no employees)

Even with your workers' comp certificate or exemption on file, CSLB will not issue your license number until all remaining issuance requirements are complete. Depending on your situation, that can include paying the initial license fee, completing fingerprinting (Live Scan), passing the asbestos open-book exam (when applicable), and satisfying any other outstanding CSLB conditions.

Tip for applicants: Avoid preventable delays by making sure the business name on the policy matches your CSLB application exactly and that the license or application fee number is included.

How to Stay Compliant After You're Licensed

Once you are licensed, the main rule is simple: if you are required to carry workers' comp, you must maintain it continuously. If you do not obtain or maintain coverage when required, your license can be automatically suspended by operation of law.

Common trigger events that cause compliance problems:

• Hiring your first employee (including part-time).
• Changing how labor is structured (for example, adding a helper or changing roles).
• Changing business structure, qualifier arrangement, or classifications in a way that affects exemption eligibility.
• Using subcontractors or 1099 labor without collecting proof of workers' comp coverage or a valid exemption.

If you cannot document that a subcontractor is properly insured (or exempt), your workers' comp insurer may treat those payments as payroll exposure during the premium audit and charge additional premium.

A simple habit helps: Calendar your renewal dates, verify your CSLB record periodically, and store certificates and exemptions in one "license compliance" folder.

How to File Proof of Coverage and Avoid Delays

If you have coverage (certificate):

• Who submits it: Typically your insurance carrier or their authorized agent.
• How: CSLB's Electronic Workers' Compensation Insurance Online Submission process (insurer-facing).
• Common errors: Business name mismatch, missing license/application number, missing CSLB certificate holder, incorrect policy details, or signature issues.

If you are exempt:

• Who submits it: You (the contractor).
• How: CSLB's online exemption workflow. (Note: CSLB flags special handling for some out-of-state situations, so follow the instructions carefully.)

Real-World Scenarios

Scenario 1: "I'm a one-person painter with no employees."

Action: You are likely eligible for an exemption. Submit the exemption through the CSLB workflow.

Scenario 2: "I only hire subcontractors."

Action: You may still qualify for a workers' comp exemption if you truly have no employees. Two common pitfalls can still create problems:

• Misclassification: If your "subs" function like employees in practice (for example, you control the work the way an employer would), you may trigger workers' comp obligations. If you are unsure, get qualified guidance and keep your documentation clean.
• Audit surprises: Even when you use subcontractors, your workers' comp insurer may charge additional premium at audit if you cannot provide proof that each subcontractor carried their own workers' comp policy or had a valid exemption.

Pro tip: If you are moving toward employee labor or want workers' comp set up correctly from the start, our friends at Pro-Builders Insurance Agency can help you compare options and get the paperwork lined up.

Scenario 3: "I'm a C-39 roofer working alone."

Action: You must carry workers' comp. Have your insurer submit a certificate.

Scenario 4: "I just hired my first part-time helper."

Action: You are now an employer. Get coverage immediately. If you had an exemption on file, it no longer applies.

Scenario 5: "My policy lapsed yesterday."

Action: If coverage is required for you, your license may be automatically suspended by operation of law until CSLB receives acceptable proof. Reinstate coverage immediately.

Conclusion

Whether you are applying or already licensed, workers' comp comes down to one thing: have the right paperwork on file and keep it current. If you are applying, CSLB needs your certificate or exemption before they can issue your license number. If you are already licensed, continuous coverage (or a valid exemption) helps you stay active and avoid avoidable delays.

If you want a clear path forward, Contractors Intelligence School can help with exam prep and licensing guidance. For insurance and bonds, our friends at Pro-Builders Insurance Agency can help you shop and set up contractor bonds, general liability, workers' comp, builders risk, and inland marine tool coverage.