According to California Labor Code Section 3700, which statement is correct regarding workers' compensation insurance requirements for California contractors?
Correct Answer
B) Sole proprietors without employees are exempt from workers' compensation requirements
Under California Labor Code Section 3700, sole proprietors without employees are exempt from mandatory workers' compensation insurance. However, once a contractor hires even one employee, workers' compensation coverage becomes mandatory. Partnerships and corporations have different requirements under the same code section.
Why This Is the Correct Answer
California Labor Code Section 3700 specifically exempts sole proprietors who have no employees from workers' compensation insurance requirements. This exemption recognizes that sole proprietors working alone cannot injure themselves in a way that would trigger workers' compensation claims. The moment they hire even one employee, including part-time or temporary workers, the exemption ends and coverage becomes mandatory.
Why the Other Options Are Wrong
Option A: All contractors must carry workers' compensation insurance regardless of employee count
This is completely incorrect. Workers' compensation insurance cannot be replaced by posting a bond. When required, it is mandatory insurance coverage, not an optional requirement that can be substituted with financial guarantees.
Option D: Workers' compensation is only required for contractors with more than 5 employees
This is incorrect because there is no minimum employee threshold of 5 for workers' compensation requirements. California law requires coverage as soon as the first employee is hired, regardless of whether it's one employee or fifty.
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