Under California Labor Code Section 3700, what happens if a contractor fails to secure required workers' compensation coverage?
Correct Answer
C) Misdemeanor charges and stop work order
Labor Code Section 3700 makes failure to secure workers' compensation coverage a misdemeanor, and the contractor may face stop work orders and personal liability for any workplace injuries.
Why This Is the Correct Answer
Labor Code Section 3700 makes it a misdemeanor to operate without required workers' compensation coverage. Consequences include criminal charges, stop work orders halting all active projects, and personal liability for any medical costs and damages from workplace injuries that would otherwise have been covered by insurance.
Why the Other Options Are Wrong
Option A: License suspension only
License suspension alone understates the consequences. While the CSLB can and does suspend licenses for workers' comp violations, Section 3700 also imposes criminal misdemeanor liability and stop work orders. The answer 'license suspension only' is incomplete.
Option B: Fine of $1,000 per employee
A fine of $1,000 per employee is not the penalty specified by Section 3700. While fines are part of the enforcement picture, the primary consequence is criminal misdemeanor charges — not a per-employee civil fine.
Option D: Warning for first offense
There is no 'warning for first offense' provision under Section 3700. Operating without workers' compensation is treated as a serious violation from day one, reflecting the significant risk of harm to unprotected workers.
Memory Technique
No workers' comp = 'criminal + stop.' Section 3700: misdemeanor charges + stop work order. Think of it as the state pulling the plug on your job site AND charging you with a crime.
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