What Is California Labor Code §3717: UEBTF Civil Action Against the Employer?

In the event that the appeals board finds that a corporation is the employer of an injured employee, and that the corporation has not secured the payment of compensation as required by this chapter, the following persons shall be jointly and severally liable with the corporation to the director in the action:

(1) All persons who are a parent, as defined in Section 175 of the Corporations Code, of the corporation.

(2) All persons who are substantial shareholders, as defined in subdivision (b), of the corporation or its parent.

What does Labor Code 3717 actually do?

It lets the Director of Industrial Relations sue your illegally uninsured employer, in the director’s own name, to collect your final workers’ compensation award.

Once your award against an uninsured employer becomes final, Labor Code 3717 turns it into what the law calls a liquidated claim for damages. That award can come from a Workers’ Compensation Appeals Board decision under Labor Code 3715, an approved settlement, or a rehabilitation unit order. Either way, the appeals board certifies the amount to the director. From there, the director can file a civil lawsuit against your employer or get a court judgment on the award instead of filing a new case. This rule applies after your claim is already decided. It is the collection step, not the step that proves your injury.

This section applies to you once you already have, or are about to get, a final award against an employer who was illegally uninsured. It matters most when that employer, or the people who own it, have not simply paid what the award already says they owe.

Can the people who own the company be personally responsible too?

Yes, in a defined group of cases: a corporation’s parent company, and any shareholder with a 15 percent stake or more in it.

If the appeals board finds that your employer is a corporation that skipped workers’ compensation coverage, Labor Code 3717 reaches past the company itself. Anyone who is the corporation’s parent, as Corporations Code Section 175 defines that word, is jointly and severally liable with the corporation. So is any substantial shareholder. That means someone who owns at least 15 percent of the stock, or, if no stock was ever issued, at least 15 percent of the beneficial interest, in the corporation or its parent. This is called joint and several liability. It means the director can collect the full amount from the parent alone, the shareholder alone, the corporation alone, or from more than one of them together. State tax rules decide how shares held by family members or related entities count toward that 15 percent line. A narrow group of large, publicly regulated securities issuers are not treated as a corporation under this specific rule at all.

How fast does this lawsuit move once it is filed?

Quickly. The law sets short deadlines and puts the case ahead of other civil cases once it is ready for trial.

A defendant has 10 days to respond once served with the lawsuit, 20 days to reply after that, and 30 days for the next step after that. The court must decide any motions within 10 days of filing them. Once the paperwork stage of the case is done, it jumps to the head of the trial docket, ahead of other civil cases already waiting their turn. To prove the claim, the director only needs to attach a certified copy of the appeals board’s findings and award. The law treats everything in that award as already proven.

Does the director always have to sue before you see any money?

No. The director can work out payment informally with your employer before a formal award ever issues, if that gets you paid sooner.

Labor Code 3717 says nothing in this chapter stops the director from informally adjusting a claim before a findings and award comes out, whenever that will get compensation benefits to you faster. A lawsuit is the backup tool for a final, certified award your employer still will not pay. It is not the only path to being paid.

How is this different from suing your employer yourself?

This is the director’s own lawsuit, mainly to recover Fund money. You separately have your own right to sue your uninsured employer directly.

Labor Code 3717 is the state’s own tool, brought in the director’s name. It mainly recovers what the Uninsured Employers Benefits Trust Fund already paid, or still owes, on your award. Labor Code 3716 and Labor Code 3716.2 set what the Fund pays and where any extra recovery goes. You also have a separate option: suing the same uninsured employer under Labor Code 3706. There, Labor Code 3708 presumes your employer was negligent. The two lawsuits can run side by side, and a judgment in either one can be entered under Labor Code 5806.

What should you save once your award against an uninsured employer is final?

Keep the certified award, the date it became final, and anything you know about your employer’s ownership.

Save the appeals board’s findings and award and the notice showing when it became final. If you know your employer operates as a corporation, write down what you know about who owns it, including any parent company. That information can matter later if the director, or your own lawyer, has to look past the company itself to collect. Our guide to claiming against the Fund walks through the steps that usually come before a Labor Code 3717 lawsuit.

If your uninsured employer, or the people behind it, still have not paid what an award says they owe, Eman Yazdchi reviews each matter individually and can go over whether a Labor Code 3717 collection action already applies to your case. Call (661) 273-1780 or use the contact form to discuss where your case stands.