Under California Labor Code Section 3700, which statement is correct regarding workers' compensation insurance requirements for contractors?
Correct Answer
D) All contractors must carry workers' compensation insurance if they have any employees
California Labor Code Section 3700 requires all employers, including contractors, to carry workers' compensation insurance if they have any employees. There is no minimum number of employees that triggers this requirement, and coverage is mandatory regardless of project size.
Why This Is the Correct Answer
California Labor Code Section 3700 mandates that all employers — including contractors — must carry workers' compensation insurance the moment they have any employees, regardless of how many. There is no minimum employee threshold, no project value minimum, and no exemption based on project type.
Why the Other Options Are Wrong
Option A: Subcontractors are automatically covered under the general contractor's policy
Subcontractors are NOT automatically covered under the general contractor's policy. Each subcontractor must carry their own workers' compensation insurance for their own employees. Assuming otherwise exposes both parties to significant liability.
Option B: Workers' compensation is only required for projects over $500
Workers' compensation is not limited to projects over $500. The $500 threshold exists in other contexts (like the home improvement contract requirement), but it has no bearing on workers' compensation obligations, which are triggered by the employment relationship itself.
Option C: Only contractors with more than 5 employees must carry workers' compensation insurance
The 5-employee threshold is a common misconception. California's workers' compensation law has no minimum employee count — even one employee triggers the mandatory insurance requirement. This is stricter than what many candidates assume.
Memory Technique
Remember: 'One employee = full WC obligation.' California has zero tolerance for uninsured employers. The moment a contractor hires anyone, workers' compensation is mandatory. No thresholds, no exceptions based on project size.
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