Certain business owners may elect to exclude themselves from workers' compensation insurance coverage. Currently, this applies to officers and members of boards of directors who own at least 15% of the issued or outstanding stock of the corporation, general partners and managing members of limited liability companies who meet the statutory requirements. In order to be excluded, the individual must execute a written waiver of his or her rights under the Labor Code.
California Labor Code (Sections 3351 and 3352) governs the exclusion of these individuals. These Labor Code provisions are being revised effective July 1, 2018, and will change the requirements for exclusion and the individuals who may elect to exclude themselves from coverage. The individuals who, if meeting the statutory requirements, may elect to waive workers’ compensation coverage effective July 1, 2018 include:
Effective July 1, 2018, sole shareholders who are an officer or director of a private corporation or a private cooperative corporation, or who are an owner of a private professional corporation, are excluded from the definition of “employee,” unless the officer, director, owner, private corporation, private cooperative corporation or private professional corporation, as applicable, has elected to be subject to liability for workers’ compensation pursuant to Labor Code Section 4151(a).
In order to be excluded, the individual must execute a document, in writing and under penalty of perjury, waiving his or her rights under the Labor Code and stating that he or she has the qualifications or coverage(s) identified above. The California Department of Insurance has published sample waiver forms.
If you have questions concerning these exclusions, please consult your insurance professional or legal advisor.
When the above individuals are subject to workers' compensation coverage, the annual payroll used for premium computation is subject to minimum and maximum limitations. For the current minimums and maximums, see Part 3, Section V, Rule 1(j) of the California Workers' Compensation Uniform Statistical Reporting Plan—1995. These limits are subject to annual adjustments.
For information regarding recent changes to Labor Code Sections 3351 and 3352, the WCIRB has issued the following bulletins:
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