According to California Labor Code Section 3700, which statement is correct regarding workers' compensation insurance for California contractors?
Correct Answer
A) Every employer must secure payment of compensation in one of several ways including insurance or self-insurance
California Labor Code Section 3700 requires every employer, including contractors, to secure payment of workers' compensation through insurance, self-insurance, or participation in a group self-insurance plan. There are very limited exceptions, but generally all contractors must carry workers' compensation coverage regardless of project size or number of employees.
Why This Is the Correct Answer
California Labor Code Section 3700 mandates that every employer — including contractors — must secure workers' compensation coverage through one of several approved methods: purchasing a policy from an authorized insurer, qualifying as a self-insurer, or joining a group self-insurance plan. This is a broad, near-universal requirement with very limited exceptions.
Why the Other Options Are Wrong
Option B: Workers' compensation is only required for projects over $500
There is no $500 project threshold for workers' compensation requirements in California. The obligation to carry coverage is based on having employees, not on the dollar value of the project.
Option C: Contractors with fewer than 5 employees are exempt from workers' compensation requirements
California law does not exempt small employers with fewer than 5 employees. Even a contractor with a single employee must carry workers' compensation insurance. A sole proprietor with no employees may be exempt, but employee count alone does not create an exemption.
Option D: Workers' compensation is only required for residential construction projects
Workers' compensation is required for all construction types — residential and commercial alike. There is no limitation to residential projects. The requirement is project-type agnostic.
Memory Technique
Think: '3700 = No Exceptions. One employee = full coverage required.' The moment a worker is on your payroll, workers' comp kicks in under Section 3700. No project size or workforce size exemptions.
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