DEF Construction employs 15 workers and wants to self-insure for workers' compensation. What is required under California law?
Correct Answer
A) Certificate of consent to self-insure from the Director of Industrial Relations
California allows private employers to self-insure for workers' compensation, but requires obtaining a certificate of consent to self-insure from the Director of Industrial Relations, along with meeting financial and other requirements.
Why This Is the Correct Answer
California Labor Code Section 3700 permits private employers to self-insure for workers' compensation, but only after obtaining a certificate of consent to self-insure from the Director of Industrial Relations. This certificate requires demonstrating financial strength and meeting specific requirements set by the DIR. Simply having employees and assets is not sufficient without the certificate.
Why the Other Options Are Wrong
Option B: Minimum of 25 employees and $5 million in assets
Requiring a minimum of 25 employees and $5 million in assets is incorrect. While financial requirements do exist for self-insurance approval, the California Labor Code does not specify a minimum employee count of 25 or a flat $5 million asset threshold as hard prerequisites. The determining requirement is the DIR certificate.
Option C: Automatic approval with proper financial statements
Automatic approval with proper financial statements is incorrect. Self-insurance is never automatically approved in California. It requires a formal application, review, and issuance of a certificate by the Director of Industrial Relations. There is no automatic pathway.
Option D: Only applicable to public entities
Saying self-insurance is only applicable to public entities is incorrect. California law expressly allows private employers — including private construction contractors — to self-insure. Public entities have separate self-insurance rules, but the option is not exclusive to them.
Memory Technique
To self-insure in California, you need the DIR's blessing — a 'Certificate of Consent.' Think: 'DIR says YES before you can skip buying WC insurance.' The Director of Industrial Relations is the gatekeeper.
More ca-business-org Questions
A contractor is bidding on a public works project in Los Angeles County with a contract value of $2,000,000. The prevailing wage determination shows carpenter wages at $45.50 per hour. What additional amount must be paid for health and welfare benefits?
A construction company has 15 employees working on a project. One employee suffers a work-related injury. Under California law, what is the primary difference between Cal/OSHA and federal OSHA jurisdiction?
A contractor employs 8 workers and pays total wages of $480,000 annually. If the Unemployment Insurance (UI) tax rate is 3.4% on the first $7,000 of each employee's wages, what is the total annual UI tax owed?
Under Cal/OSHA regulations, what is required when a construction site has a trench excavation deeper than 5 feet?
A public works project requires certified payroll records. The prevailing wage for an electrician is $52.75 per hour with $18.50 in fringe benefits. If an electrician works 8 hours, what is the total prevailing wage obligation?
On a prevailing wage project, a carpenter's regular rate is $28/hour, but the prevailing wage is $35/hour with $8/hour in benefits. What must the contractor pay if the carpenter already receives $6/hour in benefits?
A California contractor has quarterly payroll of $85,000. What is the State Disability Insurance (SDI) withholding amount if the current SDI rate is 0.9% and the wage base limit is $153,164 annually?
Under California law, which statement about business entity liability is CORRECT?
XYZ Contracting LLC has 8 employees in California. An employee is injured on the job and requires medical treatment costing $15,000. The company has no workers' compensation insurance. What is XYZ's potential liability?
A general contractor subcontracts electrical work to an LLC. The electrician works exclusively for this contractor, uses the contractor's materials, and follows the contractor's daily schedule. Under AB5, this relationship is likely:
People Also Study
Business & Financial Management
120 questions · 70% to pass
Contract Administration
60 questions · 70% to pass
Project Management
60 questions · 70% to pass
Related Study Resources
Previous Question
A California contractor wants to form a business entity that allows multiple owners, pass-through taxation, and flexible management structure without the formalities of corporate governance. Which entity type best meets these requirements?
Next Question
A contractor wants to form a business entity that allows multiple owners with different levels of management involvement and liability protection. Which California entity type best meets these needs?