If your business is a California corporation, a C-corp or an S-corp, and it has any employees, yes, it must carry workers compensation insurance from the first worker under Labor Code section 3700. Corporate officers and directors who draw pay for services are usually covered employees by default, with one important exception: an officer or director who is the sole shareholder of the corporation is out by default and has to elect coverage to insure their own injuries. Any other officer can be left off the policy only by owning enough of the company and signing a formal waiver. Having employees, including owner-officers on payroll, is what makes coverage mandatory.
Who this is for: Owners, officers, and directors of a California corporation, from a small S-corp with a few employees to a closely held company whose owners draw a salary.
The short version
- A California corporation with any employees must carry workers comp; there is no headcount minimum.
- Most officers and directors are covered by default when they render services for pay, but an owner who is the corporation's sole shareholder is the exception.
- If you are the sole shareholder, you are excluded by default and must elect coverage to insure your own on-the-job injuries; there is no 10 percent test and no waiver to sign to stay off.
- An officer or director who is not the sole shareholder can opt out only by owning at least 10 percent of the stock, carrying health coverage, and signing a waiver, under penalty of perjury.
- A lower 1 percent stake can qualify instead if a close family member owns at least 10 percent and the officer has health coverage.
- Regular W-2 employees are always covered; the opt-out choice applies to qualifying officers and directors.
How officers and directors are treated
Since California's 2017-2018 changes (AB 2883 and SB 189), a corporate officer or director who works for pay is usually an included, covered employee by default. There is one big exception written into Labor Code section 3352: an officer or director who is the sole shareholder of the corporation is excluded from the definition of employee by default, the same way a sole proprietor is. A sole owner is not automatically on the policy and must affirmatively elect coverage under Labor Code section 4151 to insure their own on-the-job injuries, with no ownership test, no health-coverage condition, and no waiver required. For any officer or director who is not the sole shareholder, the default runs the other way. To be excluded, that officer or director must own at least 10 percent of the company's issued stock, be covered by a health plan, and sign a written waiver, under penalty of perjury, stating that they are a qualifying officer or director. A smaller stake of at least 1 percent can qualify instead if a parent, grandparent, sibling, spouse, or child owns at least 10 percent and the officer is covered by a health plan. The health-coverage condition applies to both paths, not just the 1 percent one. The shares can be held in a revocable trust. So a founder-owner who wants off the policy usually can be, while a minority officer without that ownership generally cannot opt out on their own.
Covered, excluded, or required
| Who | Default on a corporate policy | Can they opt out? |
|---|---|---|
| W-2 employee | Covered | No, employees are covered by the policy |
| Officer or director who is the sole shareholder | Excluded (out) by default | Reversed: they elect coverage under section 4151 to be covered |
| Officer or director owning 10 percent or more, with health coverage | Included unless waived | Yes, by signing the penalty-of-perjury waiver |
| Officer owning 1 percent or more, with a family owner at 10 percent and health coverage | Included unless waived | Yes, by signing the waiver |
| Minority officer without that stake | Covered | Generally no; they stay on the policy |
Why carrying a policy keeps you out of court
The corporate form shields shareholders from many business debts, but it does not by itself answer an injured worker. If the corporation carries no comp when required, an injured employee can sue in civil court, where the law presumes the injury was the company's fault and removes the defenses that the worker was careless, knew the risk, or was hurt by a co-worker. Carrying a policy makes comp the employee's exclusive remedy, which generally blocks that lawsuit. For a closely held corporation whose owners also work in the business, that protection often matters as much as the medical and wage benefits themselves.
A Riverside example
Illustrative, not a quote. A Riverside HVAC company is an S-corp with two owner-officers who each own half of it, plus six field technicians. Because each officer owns well over 10 percent, both sign waivers to exclude themselves, since they mostly run the office. They keep a policy covering the six technicians, whose rooftop and attic work carries real injury risk. When a technician falls from a ladder, the injury is covered and the company keeps its exclusive-remedy protection. The owners ask us to confirm the technicians are rated on the correct kind of work so the premium is not inflated.
Real questions California owners ask
Does my California corporation have to carry workers comp?
If it has any employees, yes, from the first worker. That includes owner-officers who draw pay, since they are covered employees by default. There is no headcount minimum in California.
Am I covered as an owner-officer?
Usually, but it turns on whether you are the only owner. If you are an officer or director drawing pay and there are other shareholders, you are an included, covered employee unless you sign a waiver to opt out. If you are the sole shareholder, the rule flips: you are out by default and have to elect coverage to insure your own injuries.
Can I take myself off the policy?
It depends on your ownership. If you are the sole shareholder, you are already off by default, so the real question is whether to elect coverage to protect yourself. Otherwise, to take yourself off you must own at least 10 percent of the company's stock, carry health coverage, and sign a written waiver under penalty of perjury; a minority officer without that stake generally cannot opt out.
Is there a way to opt out with less than 10 percent?
Yes, in a narrow case. An officer owning at least 1 percent can qualify if a parent, grandparent, sibling, spouse, or child owns at least 10 percent and the officer is covered by a health plan.
Are my regular employees covered if I have a policy?
Yes. W-2 employees are covered by the corporate policy. The include-or-exclude choice applies only to qualifying officers and directors, not to rank-and-file staff.
Does incorporating protect me from an injured worker?
Not by itself. The corporate form shields shareholders from many debts, but an injured employee is a separate exposure. Without required comp, the corporation can be sued and loses its usual defenses.
Should I put myself on the policy or waive out?
It depends on whether you do physical work and want your own injuries covered. If you mainly run the office, excluding yourself lowers the premium; if you do hands-on work, staying on the policy covers you too.
Why California owners choose Morrow
- We shop the right market for you. In California you buy workers' comp on the open market from any licensed private carrier, with the State Compensation Insurance Fund competing alongside them and standing as the insurer of last resort, so we can shop your rate freely and still have a guaranteed fallback for hard-to-place accounts.
- We catch pricing mistakes. Your price depends heavily on the category your work falls into for pricing (the class code). Put people in the wrong category and you overpay for years. We review your payroll and classifications before you buy.
- Proof of coverage, fast. Need a certificate (proof of coverage) for a general contractor or a landlord before Monday? We turn those around the same business day for most carriers.
- We help lower the score that drives your price. Insurers give you a score based on your past claims that raises or lowers your cost (the experience modification rate). We review it each year, flag errors, and connect you with return-to-work and safety resources that bring it down.
- Real people when a claim happens. When someone gets hurt, we stay involved through the life of the claim, not just at renewal.
Related California guides
Every California business is set up a little differently. These companion guides answer the same question for other situations, plus the national explainers behind the terms used here.
- Business insurance in California (start here)
- Workers comp: the owner's overview
- I own an LLC: do I need workers comp?
- I'm a sole proprietor: do I need workers comp?
- We're a partnership: do we need workers comp?
- We're a nonprofit: do we need workers comp?
- My workers are 1099: do I still need it?
- Only part-time or seasonal staff: do I need it?
- I only employ family: do I need workers comp?
- Remote or out-of-state staff: do I need coverage?
- What happens if I don't carry workers comp?
- How much does workers comp cost?
- How do I get workers comp (even if turned down)?
- What insurance do I need for a contractor license?
- Workers compensation insurance, explained
- What workers comp costs (national guide)
- Workers comp vs employers liability
- What workers comp does not cover
- California HVAC workers comp
This guide is general information, not legal advice. California rules and penalty amounts can change, so verify current requirements with California Division of Workers' Compensation (DWC), a division of the Department of Industrial Relations (DIR) or a licensed advisor before you rely on them. Last updated: July 2026.