What Is California Labor Code §3722: Penalty for an Uninsured Employer?

At the time the stop order is issued and served pursuant to Section 3710.1, the director shall also issue and serve a penalty assessment order requiring the uninsured employer to pay to the director, for deposit in the State Treasury to the credit of the Uninsured Employers Fund, the sum of one thousand five hundred dollars ($1,500) per employee employed at the time the order is issued and served, as an additional penalty for being uninsured at that time or issue and serve a penalty assessment order pursuant to subdivision (b).

What penalty does Labor Code 3722 set, in plain words?

It is a state fine on an employer for having no workers' compensation insurance, paid to the state rather than to the injured worker.

Two different tracks can apply. Under the first, the moment a stop order goes out under Labor Code 3710.1, the director also serves a penalty of $1,500 for each employee on the payroll that day. Under the second, used instead of the first, an employer uninsured for more than a week in the year before the finding owes the greater of twice the unpaid premium or $1,500 per employee for that period. Either way, the employer pays the state, not the worker directly.

Who does this penalty apply to?

It applies only to the employer, once the state finds the employer illegally skipped workers' compensation coverage.

The penalty falls on the employer alone. It does not reduce or replace what an injured worker can recover. If you were hurt while working for an uninsured employer, your own path to medical care and disability pay runs through Labor Code 3715, entirely apart from whatever the state collects from your employer under this law.

How much can this penalty cost an uninsured employer?

The amount depends on how the state caught the employer, and it can run from $1,500 a head into the tens of thousands.

The table below lines up the four penalty amounts Labor Code 3722 sets and what triggers each one.

Except for the prior year penalty, Labor Code 3722 caps total penalties assessed under this law at $100,000.

Is this penalty the same as your own workers' compensation benefits?

No. The penalty goes to the state's Uninsured Employers Fund, while your own medical care and disability pay come through your own claim.

The statute sends every payment to the credit of the Uninsured Employers Fund in the State Treasury, managed by the director. That fund is separate from your own benefits. If the appeals board awards you compensation under Labor Code 3715 and your employer will not pay it, a different law, Labor Code 3716, can let the director pay your award from the Uninsured Employers Benefits Trust Fund instead. The penalty under this law does not fund that payment; it punishes the employer.

How does this penalty connect to the stop order and other consequences?

It usually arrives with the stop order, and it stands apart from the separate criminal charge an uninsured employer can face.

The flat $1,500 penalty is served at the same time as the stop order under Labor Code 3710.1, which halts the employer's use of labor until it gets coverage. An uninsured employer can also face a misdemeanor charge under Labor Code 3700.5, and an injured worker can still choose the civil lawsuit allowed under Labor Code 3706. None of these tracks replaces the others; more than one can reach the same employer at once.

What if the state sets your employer's penalty from an actual claim?

If the appeals board rules on your claim and finds your employer uninsured, your employer must report its employee count so the state can set the penalty.

When the appeals board mails its findings to the director, it also directs your employer to submit a signed statement of how many employees it had on the date of your injury, due within 10 days of that service. The actual dollar penalty is not assessed until the time to appeal has passed and the decision becomes final. If your employer skips the statement, or the director doubts the number, the director can use any other information available to set the employee count and the penalty.

What should you do if your employer may be uninsured?

Document your own claim and let the state run its own penalty process; the two move on different tracks.

You do not have to calculate or chase this penalty. That is the director's task once a stop order or a claim finding triggers it. Your task is to protect your own claim: keep your injury report, your pay records, and anything showing your employer had no coverage, and pursue your Labor Code 3715 benefits or a Section 3706 civil case while the state's penalty process moves on its own.

If the state has already moved against your employer with a stop order or a penalty, your own injury claim still moves on its own track and does not depend on what happens to your employer. Yazdchi Law P.C. reviews each matter individually and can help you pursue your medical care and disability benefits while the state handles the penalty side separately. Call (661) 273-1780 or use the contact form to go over your claim.