A contractor employs 6 workers and claims to be exempt from workers' compensation requirements. Under what circumstance would this exemption be valid?
Correct Answer
B) All workers are independent contractors with their own licenses
True independent contractors with their own licenses are not considered employees for workers' compensation purposes, but this must be properly documented.
Why This Is the Correct Answer
Workers' compensation requirements apply to employees, not independent contractors. If all 6 workers are true independent contractors who hold their own valid contractor licenses, they are not considered employees for workers' compensation purposes. However, this classification must be properly documented, and the workers must genuinely be operating as separate licensed entities — not simply labeled independent contractors to avoid coverage.
Why the Other Options Are Wrong
Option A: All workers are family members
All workers being family members does not automatically exempt them from workers' compensation. Family members who work for a contractor and receive compensation are generally considered employees under California law and must be covered.
Option C: Project value is under $1,000
Project value under $1,000 is the threshold for licensing exemptions for certain minor jobs, not a workers' compensation exemption. Workers' comp obligations are based on employment status, not project value.
Option D: Workers are employed less than 20 hours per week
Working less than 20 hours per week does not create a workers' compensation exemption in California. Part-time employees are still employees and must be covered.
Memory Technique
Think of it this way: a worker with their own license IS their own business. You can't employ a business — you subcontract it. Licensed subs = no employee relationship = no workers' comp obligation for that person.
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