What Is California Labor Code §3850: Third-Party Credit Definitions?

As used in this chapter: (a) “Employee” includes the person injured and any other person to whom a claim accrues by reason of the injury or death of the former. (b) “Employer” includes insurer as defined in this division. (c) “Employer” also includes the Self-Insurers' Security Fund, where the employer's compensation obligations have been assumed pursuant to Section 3743.

What does Labor Code 3850 actually say?

Labor Code 3850 defines two words, “employee” and “employer,” for the rest of this chapter.

This is a short definitions section. It sets up Labor Code 3850 through 3864. Those sections apply when someone other than the employer caused a worker's injury. Think of a careless driver, a property owner, or the maker of a defective machine. The worker can sue that outside party. The worker can also keep a workers' compensation claim open at the same time. The rest of the chapter decides how money from that outside lawsuit gets divided. This section does not do that math. It only says what “employee” and “employer” mean.

Who does it apply to? Anyone with an accepted California workers' compensation claim whose injury also supports a separate claim against an outside party. That includes a family member who takes over a deceased worker's claim. The definition of “employee” covers that family member too.

How does the Labor Code 3850 definition connect to my employer's credit?

Because “employer” is defined broadly, the insurance company usually holds the credit right, not just the business you worked for.

Subdivision (b) says “employer” includes the insurer. That is why a workers' compensation insurance carrier can claim a credit, not only the company whose name was on your paycheck. Subdivision (c) adds one more case. A self-insured employer can fail to pay its own claims. If the Self-Insurers' Security Fund then takes over that employer's duties under Labor Code 3743, the fund counts as the employer too. Neither rule sets the credit amount. Labor Code 3856 does that. It sets the order of payment: costs and fees first, then employer reimbursement, then any leftover money to the worker.

Does the credit reach workers' comp benefits I have not received yet?

It can, under a separate section, and a 2026 change removed that credit for most public-safety third-party cases.

Labor Code 3861 lets the Workers' Compensation Appeals Board apply leftover third-party money as a credit against future benefits. Since January 1, 2026, that rule no longer applies to most city, county, and fire district peace officers and firefighters. Their employer's total recovery from the case is also capped. The definitions in Labor Code 3850 still control who counts as the employer under that rule.

What is the difference between Labor Code 3850 and Labor Code 3853?

One section defines words. The other is a notice rule for when a lawsuit actually gets filed.

Labor Code 3853 applies once either side sues the third party. The side that sues first must serve the other side with the complaint. It must also file proof of that service. The other side can then join the case, or the two cases can be combined before trial. That is a filing duty. It does not define any term, and it does not set a credit amount. The underlying right to sue a third party at all comes from Labor Code 3852.

What should I save or ask about if my case involves a third-party recovery?

Keep every settlement paper, and ask in writing how the credit was worked out before you sign anything.

Save the third-party complaint, the settlement or judgment, any list of litigation costs and fees, and every letter about a lien or credit. Ask the claims administrator to show the math under Labor Code 3856 before you agree to a number. A workers' comp lien is a related but different question. See how a workers' comp lien claim works.

What should an injured worker do next?

Tell your workers' comp claims administrator about any third-party claim early, and get the allocation in writing before you settle.

If someone other than your employer caused or contributed to your injury, tell your workers' compensation claims administrator about that separate claim as soon as you can. Ask how the Labor Code 3850 definitions apply to your case, who is asserting the credit, and how it was calculated. See how a third-party work injury claim works in California.

Yazdchi Law P.C. represents injured workers across California from its one office in Palmdale. The firm reviews each matter individually and does not take every case. Call (661) 273-1780 or use the contact form to ask about a claim that involves both workers' compensation and a third-party case.