Which situation would require a contractor to obtain workers' compensation coverage even if they typically work alone?
Correct Answer
D) Hiring their spouse to help with paperwork
Even hiring one employee, including a spouse, triggers the requirement for workers' compensation insurance in California. Independent contractors don't require coverage, and business structure doesn't affect the requirement.
Why This Is the Correct Answer
Hiring even one employee — including a spouse or family member — triggers California's mandatory workers' compensation requirement. A spouse doing paperwork, administrative tasks, or any other work for pay is legally an employee, and the contractor must obtain coverage.
Why the Other Options Are Wrong
Option A: Operating as a sole proprietorship
Operating as a sole proprietorship does not by itself require workers' compensation. A solo sole proprietor with no employees is exempt. The business structure is irrelevant; what matters is whether anyone is hired as an employee.
Option B: Working on residential projects only
Working on residential projects only does not affect the workers' compensation requirement. The type of project (residential vs. commercial) has no bearing on whether a contractor must carry workers' comp — the employee count does.
Option C: Using only independent contractors
Using only legitimate independent contractors does not trigger the workers' compensation requirement. Properly classified independent contractors are not employees, so the contractor has no obligation to provide workers' comp for them. However, if a worker is misclassified as an independent contractor, the liability would still apply.
Memory Technique
Think: 'Even one is done' — even one employee, family or not, means you must have workers' comp. The relationship (spouse, sibling) does not create an exemption.
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XYZ Contracting has 8 employees and annual payroll of $480,000. What is the approximate annual workers' compensation insurance premium if the rate is $8.50 per $100 of payroll?
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