California has passed Senate Bill 291, bringing tougher workers’ compensation insurance rules and hefty penalties for contractors operating without proper coverage.
On Sept. 12, the California Legislature enrolled Senate Bill 291, a measure that introduces new requirements for contractors regarding workers’ compensation insurance. The bill, introduced by Sen. Tim Grayson, amends several sections of the state’s Business and Professions Code and was passed by both the Senate and Assembly earlier in September.
For contractors in California, maintaining a valid Certificate of Workers’ Compensation Insurance or Certification of Self-Insurance has long been a condition for holding a license. Previously, contractors without employees could file a statement to claim exemption from this requirement, provided they did not hold certain license types. These exemptions were scheduled to change in 2028, when only joint ventures without employees would be eligible for exemption.
Senate Bill 291 now requires the Contractors State License Board to establish, by Jan. 1, 2027, a process and procedure to verify that contractors claiming exemption from workers’ compensation insurance truly have no employees. This process must include an audit, proof, or other means to obtain evidence, and the board must report its proposed verification process to the Legislature by that date.
The bill also increases civil penalties for violations. Sole owner licensees found to have employed workers without maintaining workers’ compensation coverage will face a minimum civil penalty of $10,000 per violation. Partnerships, corporations, limited liability companies, or tribal business licensees found to have employed workers without maintaining coverage will face a minimum penalty of $20,000 per violation. Additional civil penalties may be imposed for subsequent violations, not to exceed $30,000 per occurrence. The board is prohibited from renewing or reinstating a license subject to disciplinary action until the contractor provides a current and valid Certificate of Workers’ Compensation Insurance or Certification of Self-Insurance in the business name.
In addition, the board is required to report annually to the Legislature on enforcement actions, including the number of disciplinary actions for violations related to the filing of a workers’ compensation insurance exemption certificate or a certification of self-insurance.
These legislative changes are designed to strengthen oversight of contractor compliance with workers’ compensation insurance requirements. By requiring a more thorough verification process for exemption claims, the Legislature aims to ensure that only eligible contractors are exempt from coverage and that those employing workers are properly insured.
For insurance professionals, underwriters, and brokers who work with contractor clients, these changes mean increased attention to documentation and compliance. Insurers and brokers will need to ensure that clients are able to provide valid evidence for any exemption claims and maintain up-to-date coverage as required by law. The increased penalties for non-compliance serve as a significant deterrent against avoiding insurance obligations.
The annual reporting requirement adds a layer of transparency and accountability, as the Contractors State License Board must provide detailed information to the Legislature about enforcement and compliance trends. This reporting is intended to support ongoing oversight and inform future policy decisions.
Senate Bill 291 does not address health or life insurance. Its focus is solely on workers’ compensation insurance as it relates to contractors’ business operations. The bill is now enrolled, having passed both legislative chambers, and will proceed to further implementation steps as outlined in its provisions.
As these changes take effect, insurance professionals serving the contractor sector should prepare for more rigorous compliance standards and enhanced regulatory scrutiny. The new law underscores the importance of workers’ compensation coverage for contractors operating in California.
