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California Labor Code §3700 — Employer Insurance Requirement
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By Eman Yazdchi, Esq. · Certified Specialist in Workers' Compensation Law, State Bar of California Board of Legal Specialization · Cal Bar #285231
Every employer except the state shall secure the payment of compensation in one or more of the following ways: (a) By being insured against liability to pay compensation by one or more insurers duly authorized to write compensation insurance in this state. (b) By securing from the Director of Industrial Relations a certificate of consent to self-insure either as an individual employer, or as one employer in a group of employers, which may be issued upon furnishing proof satisfactory to the director of ability to self-insure and to pay any compensation that may become due to his or her employees.
What does California Labor Code §3700 require?
Section 3700 covers nearly every California employer the moment the first worker is hired, including small businesses, household employers using domestic help, and corporate entities.
Section 3700 is California's rule that nearly every employer must carry workers' compensation insurance, either by purchasing a commercial policy or by qualifying for state-approved self-insurance, to protect every employee from the day the first worker is hired. The duty is mandatory, statewide, and non-delegable. Certified Specialist Eman Yazdchi (California Board of Legal Specialization, State Bar of California) handles claims against insured, self-insured, and uninsured California employers across the practice.
California Labor Code §3700, California's command that every employer secure workers' comp benefits through one of two routes, requires either (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, California's no-fault bargain that opens workers' comp without proof of employer fault, operational; without coverage in place, there is no funded source from which the worker's benefits can be paid.
Which California employers must comply with §3700?
Every California employer with at least one employee must comply, including for-profit, nonprofit, public, household-domestic, agricultural, and farm-labor-contractor entities under the statute.
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.
What are the two §3700 California compliance routes?
Compliance routes are limited to purchasing a State Compensation Insurance Fund or commercial policy, or qualifying for state-approved self-insurance with security and oversight.
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.
What happens when a California employer violates §3700?
Violation creates personal officer liability, criminal misdemeanor exposure, civil penalties, stop-orders, and worker access to the Uninsured Employers Benefit Trust Fund for benefits.
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.
How does §3700 interact with the Uninsured Employers Benefits Trust Fund?
When an employer lacks coverage, the UEBTF pays the worker's benefits and pursues the uninsured employer through civil judgments, wage garnishment, and contractor-license enforcement actions.
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.
Related on yazdchilaw.com: California workers' compensation lawyer pillar · California Labor Code §5400.30 explained · California Labor Code §3700.6 explained · what to do if you can't go back to work after a workers' comp injury.
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What does California Labor Code §3700 actually require an employer to do?
California Labor Code §3700 requires every California employer to secure the payment of workers' compensation benefits through one of two routes: insurance against liability with an admitted California comp insurer, or a Certificate of Consent to Self-Insure issued by the Director of Industrial Relations. The §3700 California rule is the statutory foundation of the entire comp coverage system, without §3700 compliance, the California Labor Code §3600 no-fault bargain has no funded source. Non-compliance triggers California Labor Code §3700.5 criminal exposure and California Labor Code §3706 civil-suit exposure on top.
Which California employers must carry workers' comp under §3700?
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. Worker classification under California Labor Code §2775 decides who is a covered employee; once classified, California Labor Code §3351 confirms coverage regardless of immigration status, and §3700 California obligates the employer to insure that workforce. The duty is non-delegable to subcontractors or staffing agencies.
What happens when a California employer violates §3700?
When a California employer violates California Labor Code §3700, three layers of consequence apply simultaneously. 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 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 benefits and seeks reimbursement.
What are the two §3700 California compliance routes for an employer?
Under California Labor Code §3700, a California employer satisfies the comp-insurance mandate by one of two routes. Route one is purchasing a workers' compensation policy from an insurer admitted to transact comp business in California, the California Insurance Commissioner maintains the admitted-carriers list. Route two is qualifying as a self-insured employer through the Department of Industrial Relations Office of Self-Insurance Plans, which requires posting security, financial-strength demonstration, and ongoing reporting. The §3700 California obligation is non-delegable to subcontractors or staffing agencies.
What happens to the injured worker when a California employer is uninsured under §3700?
When a California employer fails to carry comp insurance as California Labor Code §3700 requires, the injured worker is NOT left uncompensated. The Uninsured Employers Benefits Trust Fund administered by the Division of Workers' Compensation pays the worker's benefits, California Labor Code §4600 medical, California Labor Code §4653 TD, California Labor Code §4660 PD, and then pursues reimbursement from the uninsured California employer. The worker may also separately sue the employer in civil court under California Labor Code §3706 outside the California Labor Code §3601 exclusive-remedy bar, with the added advantage of a presumption of employer negligence in that civil action.
Last reviewed by Eman Yazdchi, Esq., June 2026.
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