The California Labor Code and Workers’ Compensation

California law requires all employers to carry workers' compensation Insurance. Workers' compensation provides injured workers with medical care, disability, vocational retraining, and other benefits. Workers' compensation is the "exclusive remedy" and Workers are protected by this coverage, giving up their right to any other remedy for workplace injury. 

Every staffing company that supplies and every company that utilizes contingent workers in California should be familiar with the California Labor Code. This blog provides information on some of the key sections of the Code with regards to workers’ compensation coverage, which applies to all W-2 contingent workers as well as internal staff.

If you are employing or utilizing contingent workers in California understanding these key sections of the Labor Code in concert with co-employer risks is important for any well run contingent workforce program.

Working with Staffing Companies Who Provide Workers’ Compensation Insurance to Workers as Part of Their Service
(Section 3602)

A client company may secure the payment of workers’ compensation on employees provided to their company by agreement with their staffing company by entering into a valid agreement with the staffing company - under which the staffing company agrees to obtain workers' compensation coverage for those employees.

If both companies enter into this agreement, both employers shall be considered to have secured the payment of workers’ compensation - provided there is a valid legal agreement between the employers to obtain the appropriate level of workers’ compensation coverage and that the coverage remains in effect for the duration of the employment provided.

Non-compliance with the above could result in civil or criminal penalties for failure to provide workers' compensation coverage or legal liability in the event of an employee injury.

Every California Employer Must Secure Payment of Compensation in One of the Following Ways (Section 3700)

A.) By being insured against liability to pay compensation by one or more insurers duly authorized to write compensation insurance in California.

B.) By securing a certificate of consent to self-insure either as an individual employer, or as one employer in a group of employers, by the Director of Industrial Relations. To be considered, you must give proof that you have the ability to self-insure and to pay any compensation that might arise to your employees.

Consequences of Failing to Secure the Payment of Compensation (Section 3700.5, Section 3706, Section 3707, Section 3708 )

The failure to secure the payment of compensation is a misdemeanor punishable by imprisonment in the county jail for up to one year, or by a fine of up to double the amount of premium, as determined by the court; or by both imprisonment and fine.

If the employer fails to secure the payment of compensation, any injured employee or his dependents may bring an action at law against the employer for damages.

If Workers’ Compensation Insurance is not provided, it is presumed by law, that the injury to the employee was a direct result of the negligence of the employer, and the burden of proof is upon the employer, to rebut the presumption of negligence.

The employer may not defend their case by arguing that the employee (or the employee’s co-workers) were guilty of contributory negligence or that the employee undertook certain risks as a necessary part of the job.

Emergent  (www.emergent.com) takes care of employer obligations including Workers’ Compensation Insurance, for temporary workers. Please contact us at info@emergent.com or on 855 250 5000 for a free consultation today! 

DISCLAIMER - Emergent maintains its blog, website and other content as a courtesy for the general informational purposes of our readers on matters of interest in the contingent labor services sector.  Nothing on this blog or any part of Emergent's website is intended to create any contractual or other legal relationship between the reader and Emergent or any of Emergent's staff, and none of Emergent's blog or website should be construed as any legal advice or professional opinion for handling a specific factual situation.  Though Emergent strives to publish the most current information on topics of reader interest, Emergent cannot guarantee or warrant the accuracy or completeness of posted information in any way.  Readers should not act upon any posted information on the Emergent blog or website without consulting with the appropriate legal, financial, or other business professional for guidance and advice. 

Workers' Compensation Basics

Recent research found that many workers hired through staffing companies often have difficulty filing worker’s compensation claims. Industry advocates and commentators have suggested problems are caused by documentation deficiencies and a lack of regulations holding staffing firms responsible for their workers.

Often, the nature of temporary employment can make it difficult to discern who is responsible for providing worker’s compensation insurance for the temporary worker. Ultimately though, it is the responsibility of whichever company is the employer of the worker to make sure that their employee has the appropriate insurance. 


Additionally, in many cases the client company that uses the services of the worker provided by the staffing company may be directing the worker on a daily basis. In this scenario both the client and the staffing company could be deemed co-employers of the worker where both companies could be responsible for ensuring that the worker has proper workers' compensation coverage. 

Navigating Workers' Compensation Issues for Managers at Client Companies

If the client company that uses the workers services would like to directly employ the worker, as opposed to the worker being employed by the staffing company, then they may add temporary workers that they or the staffing company recruits to their existing insurance policy, In this case the client company may have a better insight to the level of risk involved with employing the worker and assign appropriate job classifications. 

However, if the client company does not want to be the statutory employer for the temp workers then they may be better off engaging workers through staffing companies. In this scenario the staffing company carries the workers' compensation insurance for the workers. It is important in this scenario to ensure that the staffing company is properly insured and classifying the workers. Because of co-employment liabilities an error on the staffing company could create risks for the client company as well. 


Another option to limit risk is to have a staffing company source the temporary worker and have an compliant, stable employer for the workers during their assignment. Emergent is an employer of temporary and project based labor recruited by staffing companies and client companies alike. The Emergent family of companies is one of the largest employers of temporary labor in the U.S. and has over 30 years experience. With Emergent client companies can utilize the best recruiting resources to locate temporary workers while leveraging Emergent's compliant contingent workforce employer solutions to lower risk and cost. 

In any case client companies should work with their staffing company or Emergent to ensure that they have the appropriate insurance and are correctly classifying the temporary workers. They should also endeavor to see that the the temporary and project workers are working in a safe environment. 

Navigating Workers' Compensation for Staffing Companies

When staffing companies employ temporary labor, they must take care that they take they assign the proper job classifications for their employees – which can be tricky if the staffing company does not have dedicated risk management and insurance resources or if they are not ensuring that their employees are performing the type of tasks outlined for the worker. 

Staffing companies may gain by being diligent in tracking the assignments, the type of work being done before it is performed and the risk history of their clients and their locations. In some cases it may be prudent for the staffing company to perform a site visit at the client site to verify that the workers will be in a safe environment. 

Purchasing workers compensation coverage can be challenging for temporary staffing companies as the cost of the coverage can be expensive For some higher-risk industries, insurance may be hard to obtain as well. Increasingly, many smaller staffing companies are finding it either harder to get coverage for their workers, or finding that the cost is expensive and challenging to their business model.  Also, handling risk assessment and work comp claims can be time consuming, and may require additional administrative support.  Working with Emergent, staffing companies are able to benefit from our economies of scale in obtaining workers comp insurance, assessing risk and handling claims.

For Staffing Companies and Client Companies

A big worker’s compensation risk for both staffing companies AND client companies is if the worker has been erroneously classified so that neither is the employer of the worker.  If the temporary worker has been mis-classified on a 1099 basis both the staffing company and/or the client company could be liable. 

How Emergent Can Help

Emergent’s family of companies is one of the nation’s largest employers of temporary workers. We employ the temporary workers you recruit – handling time-consuming and expensive employer’s obligation’s including worker’s compensation insurance and claims management.

We can help you lower the cost and risk of engaging the contingent worker’s you recruit. Contact us today at 855-250-5000.


DISCLAIMER - Emergent maintains its blog and other website content as a courtesy for the general informational purposes of our readers on matters of interest in the contingent labor services sector.  Nothing on this blog or any part of Emergent's website is intended to create any contractual or other legal relationship between the reader and Emergent or any of Emergent's staff, and none of Emergent's blog or website should be construed as any legal advice or professional opinion for handling a specific factual situation.  Though Emergent strives to publish the most current information on topics of reader interest, Emergent cannot guarantee or warrant the accuracy or completeness of posted information in any way.  Readers should not act upon any posted information on the Emergent blog or website without consulting with the appropriate legal, financial, or other business professional for guidance and advice.