According to California Labor Code Section 3700, what is the penalty for a contractor who fails to secure workers' compensation insurance coverage for their employees?
Correct Answer
A) A misdemeanor charge and civil penalty of not less than $10,000
Labor Code Section 3700.5 establishes that failure to secure workers' compensation coverage is a misdemeanor punishable by imprisonment and/or fine, plus a civil penalty of not less than $10,000. This is a serious violation that can result in both criminal charges and substantial financial penalties for contractors.
Why This Is the Correct Answer
Labor Code §3700.5 establishes that failing to secure workers' compensation coverage is a misdemeanor, punishable by imprisonment in county jail and/or fines, plus a mandatory civil penalty of not less than $10,000. This dual criminal-and-civil penalty structure reflects California's serious stance on protecting workers.
Why the Other Options Are Wrong
Option B: Automatic suspension of contractor license for 30 days
License suspension is a consequence that CSLB may impose separately, but it is not the primary statutory penalty defined in §3700.5. The law's stated penalty is the misdemeanor charge and civil fine.
Option C: Mandatory enrollment in state disability insurance program
Enrollment in state disability insurance is unrelated to workers' compensation non-compliance. SDI and workers' comp are separate systems; one is not a substitute or penalty for the other.
Option D: A civil penalty of $1,000 per employee per day of non-compliance
A per-employee-per-day civil penalty of $1,000 is not the correct statutory formula. The law sets a minimum floor of $10,000 as a lump civil penalty, not a daily accrual rate.
Memory Technique
No workers' comp = criminal + $10K. Think: '10 grand and a handcuff' — a misdemeanor charge and a $10,000 minimum civil penalty hit you at the same time.
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A homeowner requests that a B-General Building Contractor provide a certificate of insurance naming the homeowner as an additional insured on the contractor's general liability policy. Under California law, what is the contractor's obligation?
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