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By Eman Yazdchi, Esq. · Certified Specialist in Workers' Compensation Law, State Bar of California Board of Legal Specialization
In California, Labor Code §3700 requires every California employer to secure workers' compensation insurance through an admitted carrier or qualify as a self-insured employer through the Department of Industrial Relations. A §3700 violation triggers §3700.5 misdemeanor exposure and §3706 civil tort liability outside the §3601 bar.
California Labor Code §3700 requires every California employer to secure the payment of workers' compensation benefits to its employees through one of two routes: (1) insurance against liability with an insurer admitted to transact workers' compensation business in California, or (2) qualification as a legally self-insured employer with a Certificate of Consent to Self-Insure issued by the Director of Industrial Relations. The §3700 California rule is the statutory foundation that makes the California Labor Code §3600 no-fault bargain operational — without coverage in place, there is no funded source from which the worker's benefits can be paid.
Under California Labor Code §3700, virtually every California employer with at least one employee — full-time, part-time, seasonal, or temporary — must secure workers' compensation coverage. The §3700 California mandate reaches construction, agriculture, retail, restaurant, manufacturing, healthcare, and professional-services employers. Worker classification under California Labor Code §2775 (the ABC test) decides who counts as a covered employee; once an individual is classified as an employee, California Labor Code §3351 confirms coverage regardless of immigration status, and §3700 obligates the California employer to insure for that worker.
Under California Labor Code §3700, a California employer satisfies the comp-insurance mandate in one of two ways. Route one is purchasing a workers' compensation policy from an insurer admitted to transact comp business in California — the California Insurance Commissioner publishes the admitted-carriers list. Route two is qualifying as a self-insured employer through the DIR Office of Self-Insurance Plans, which requires posting security, demonstrating financial strength, and ongoing reporting. The §3700 California obligation is non-delegable: a parent company cannot delegate the duty to a subcontractor or staffing agency.
When a California employer violates California Labor Code §3700, three layers of consequence apply at once. Under California Labor Code §3700.5, the failure is a misdemeanor punishable by county jail and fines, plus civil penalties of $10,000 per employee on the date of the violation when an injury has occurred (or $2,000 per employee with a higher aggregate cap when no injury has occurred). Under California Labor Code §3706, the injured California worker may sue the employer in civil court outside the California Labor Code §3601 exclusive-remedy bar. The Uninsured Employers Benefits Trust Fund also pays the worker's benefits and seeks reimbursement from the uninsured California employer.
Under California Labor Code §3700 and the UEBTF framework administered by the Division of Workers' Compensation, when a California employer has failed to carry comp insurance and a worker is injured, the UEBTF pays the worker's benefits — California Labor Code §4600 medical treatment, California Labor Code §4653 temporary disability, California Labor Code §4660 permanent disability — and then pursues reimbursement from the uninsured employer. The §3700 violation does not leave the California worker uncompensated; it shifts the financial burden onto the uninsured employer through the UEBTF reimbursement mechanism plus separate California Labor Code §3706 civil exposure.
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Tap to call →Last reviewed by Eman Yazdchi, Esq., May 2026.
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