In California, a corporate officer or director who owns at least 10% of the company may waive workers comp, and so may one who owns at least 1% when a close relative owns 10% and the owner has health coverage. General partners and LLC managing members may also waive. A waiver starts when the insurer accepts it; confirm any choice with the carrier.
Every Crew Deserves a Crown
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California's rules for owners turn on two things: the kind of business, and the share each person owns. A waiver is a choice each eligible owner makes, not a rule the business applies to everyone at the top. The table sets out the rules as the Department of Insurance and California's public carrier describe them.
| Owner | Rule | Source |
|---|---|---|
| Corporate officer or director | May waive with ownership of at least 10%. | Department of Insurance notice |
| Officer or director with a smaller stake | May waive with at least 1% when a close relative owns at least 10% and the owner has health coverage. | Department of Insurance notice |
| Sole shareholder | Generally left out of coverage, with the option to elect in under Labor Code 4151. | Department of Insurance notice; carrier guidance |
| General partner | May waive. | Department of Insurance notice; carrier guidance |
| LLC managing member | May waive. | Department of Insurance notice; carrier guidance |
| Limited partner or member who doesn't manage | Only general partners and managing members are named as eligible; ask the carrier. | Department of Insurance notice; carrier guidance |
These rules decide who can choose. They don't decide whether waiving is right for a given owner. Read what a waiver gives up, talk it over with the carrier, and decide person by person.
The ownership tests apply to each officer or director on their own. One owner qualifying doesn't carry the rest of the board along, and an officer who owns no shares at all doesn't meet either test. The lower 1% test exists for family companies, and it has two parts that both have to be true: a close relative holds at least 10%, and the owner has health coverage.
Illustrative scenario
A California framing company is a corporation with four officers. The founder owns most of the shares. Her brother owns at least 10%. Her son owns a small stake above 1% and has health coverage through a family plan. The office manager is an officer but owns no shares. The founder and her brother each meet the main test, and the son may meet the lower one because his mother owns more than 10%. The office manager meets neither test, so that payroll would typically stay on the policy. Each of the first three decides separately, with the carrier.
An officer, partner or member who stays on a California policy isn't reported at whatever they draw. The WCIRB's current manual sets a range: no less than $66,300 and no more than $171,600 a year for each covered officer, partner or member. An owner who draws less than the bottom figure is typically reported at it, and one who earns more than the top figure at the top.
That range can be one reason two companies with the same crew see different premium. Ask the carrier how the range applies to your policy period and to anyone who joined or left partway through the year. Builders with owners in the field can compare the trade detail on workers comp for general contractors in California.
The Department of Insurance notice allows a short backdating window, but the effective date is the one the carrier accepts. Plan the paperwork before a renewal rather than after an injury.
What a Waiver Gives Up
An owner who waives may have no workers comp benefits from the company's policy for their own work injuries. Owners who work in the field, on a roof, in a trench or at a kitchen line, should weigh that before signing, and confirm the details with the carrier.
California's tests don't travel. In Arizona the dividing share is 50%. Below it, an LLC member or shareholder who works in the business counts as an employee. At 50% or more, that owner comes onto the policy only when the carrier agrees to it by written endorsement, which is the carrier's call. Partners who work in the business and sole proprietors follow the same path, and an owner added this way is assigned a wage of at least $600 a month. See the Arizona contractor workers comp rules for the rest.
Nevada calls workers comp industrial insurance, and its statutes name no ownership share at all. Officers and LLC managers who draw no pay can opt out by giving written notice to both the company and the insurer; one who is paid and also owns the company gives notice to the insurer. Sole proprietors and working partners start outside coverage and may elect in. For a paid officer or LLC manager who keeps coverage, Nevada counts somewhere between $6,000 and $36,000 a year. The Nevada industrial insurance for contractors page has the state's other rules, and the CA AZ NV workers comp differences page lines the three states up. Each state has its own guide: Arizona majority owner workers comp rule and Nevada sole proprietor industrial insurance.
List each owner with their title, ownership share and the work they do. Owner-operators who now rely on the CSLB exemption should also read about the CSLB workers comp exemption, and restaurant groups can see how owners fit the payroll on California restaurant workers compensation. Then get a California workers comp quote with each owner's choice noted, and a broker reviews it with you.
The no-employee exemption and audit questions are among the workers comp questions answered.
Send your trade, state and payroll, and a broker reviews the request. If you would rather talk first, leave a number.
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Some can. Officers and directors qualify by owning 10% or more of the corporation, or 1% or more when a close relative holds 10% and the owner has health coverage. General partners and LLC managing members may waive too. Whether to do it is a personal choice; confirm it with the carrier.
Possibly. The lower test lets an officer or director with at least 1% waive when a close relative owns at least 10% and the owner has health coverage. Both conditions have to be met, and each person qualifies on their own. Ask the carrier what proof it needs.
The rules name general partners and LLC managing members as the owners who may waive. A member who doesn't manage the company isn't named, so ask the carrier before assuming that member can be left off the policy.
It takes effect when the insurer accepts it. The Department of Insurance notice allows a short backdating window, but the carrier's acceptance sets the date, so send the signed form before the renewal and keep the acceptance with your policy.
California reports covered officers, partners and members within a range set in the WCIRB's manual: no less than $66,300 and no more than $171,600 a year each. Your actual draw may be lower or higher; the range sets what is reported.
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Reviewed by David Gleason, Principal, on .
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California owner and officer waivers, explained rule by rule so each owner can decide.
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