What Is California Labor Code §3716: the Uninsured Employers Benefits Trust Fund?

If the employer fails to pay the compensation required by Section 3715 to the person entitled thereto, or fails to furnish the bond required by Section 3715 within a period of 10 days after notification of the award, the award, upon application by the person entitled thereto, shall be paid by the director from the Uninsured Employers Benefits Trust Fund.

What Is Labor Code 3716?

Labor Code 3716 is the rule that lets the state pay your workers' comp award when your employer is illegally uninsured and will not pay it.

Most California employers carry workers' compensation insurance or hold a valid certificate to self insure. A small number do neither. Labor Code 3716 covers what happens next for a worker who already has an award against one of those illegally uninsured employers. It does not replace the award process itself. It is the backup payment source once that process runs its course.

This rule applies only after a worker already has an award against an employer who was illegally uninsured. That award can come from a civil action under Labor Code 3706 or from an application to the Workers' Compensation Appeals Board. It does not apply when the employer is properly insured or validly self insured. That claim goes through the employer's own carrier, not through this section.

How Does a Worker Get Paid From the Fund?

The Fund steps in only after a worker has an award and the employer misses the deadline to pay it or post a bond.

The process starts under Labor Code 3715, not Labor Code 3716. A worker hurt on the job for an illegally uninsured employer can apply to the Workers' Compensation Appeals Board. The board hears the claim. It then makes an award, just as it would if the employer had carried insurance. The employer gets two choices after that: pay the award, or post a bond the board accepts.

Labor Code 3716 starts the clock on that choice. The employer gets 10 days after notice of the award to pay it or post the bond. If the employer does neither, the worker can apply to the director. The director then pays the award from the Fund instead. A finding often comes first. The director can treat the employer as prima facie illegally uninsured. Evidence for that finding can include a missed 10 day response to the written statement demand under Labor Code 3711, a denial from the named insurer, or no record of coverage with the Workers' Compensation Insurance Rating Bureau.

What Limits Apply to a Labor Code 3716 Fund Claim?

Three limits narrow what the Fund will actually pay, even after a worker wins an award.

First, the Legislature built the Fund to help workers of illegally uninsured employers, not as a backup for insured, self-insured, or legally uninsured employers. A cumulative injury or occupational disease claim faces a narrow exception. The Fund covers that type of claim only if every employer during the exposure period under Labor Code 5500.5 was illegally uninsured, with none insured, self-insured, or otherwise exempt.

Second, the Fund will not pay for care that the State Department of Health Services already covered through the California Medical Assistance Program. Third, the Fund has no liability at all until the employer gets proper notice. The employer must either make a general appearance or get served with the application and a special notice of lawsuit. That notice must warn the employer that a lien or a nonjudicial property sale can follow an award.

Does the Fund Pay Interest, Penalties, or Only the Award Itself?

The Fund pays only what a properly insured employer would have owed, not penalties or interest on top of it.

Under Labor Code 3716.2, the director pays only the benefits that would have accrued against a properly insured employer. Valid liens on that amount still apply. The Fund itself owes no penalties and no interest. That protection does not reach the employer. A later civil suit by the director can seek the full award, interest, other penalties, and attorney's fees. Any amount recovered above what the Fund paid goes back to the worker, not to the state.

What Happens if the Uninsured Employer Still Will Not Pay?

The director can sue the employer directly and record a lien against the employer's property.

Once an award becomes final, Labor Code 3717 treats it as a liquidated claim for damages. The appeals board certifies the amount to the director. The director can then sue the employer directly, in the director's own name, or obtain a judgment. The Attorney General or a Department of Industrial Relations attorney represents the director and the state in that action. The director may also contract the claims and investigation work to the State Compensation Insurance Fund.

Labor Code 3720 gives the director another tool: a recorded lien. The director can record a certificate of lien against the employer's property with the county recorder. Once recorded, the lien has the same force, effect, and priority as a judgment lien. It lasts 10 years unless released or paid off sooner.

How Does This Fit the Rest of the Uninsured Employer Process, and What Should You Save?

Labor Code 3716 is the last step in a chain that starts with the employer's basic duty to carry insurance.

Labor Code 3700 sets the employer's basic duty to carry workers' compensation coverage. When an employer skips that duty, a worker often has more than one path. One path is a civil action under Labor Code 3706, where Labor Code 3708 shifts the burden of proof onto the employer. Another path is the Fund route under this section. The facts of the case usually point to the stronger option. A published example of a worker who used more than one path is in this case study. For the practical steps of opening a claim and proving it at the appeals board, see this guide to claiming against the Fund.

Keep the appeals board's award and proof of how it was served. Keep any bond paperwork the employer filed. Keep the special notice of lawsuit if one went out. Note the date the employer was notified of the award; that date starts the 10 day clock. A small group of domestic and casual workers under subdivision (d) of Labor Code 3351 follow a modified filing rule under Labor Code 3715. Say so up front if that applies to your work.

A claim against an employer who was illegally uninsured moves on a different track than an ordinary workers' compensation claim. It has its own filing, proof, and payment rules. Yazdchi Law P.C. can review the award, the service papers, and the 10 day deadline with you. The firm reviews each matter individually. Call (661) 273-1780 or use the contact form for a free initial consultation.