Certain business owners who meet the statutory requirements may elect to exclude themselves from workers' compensation insurance coverage, including officers and members of boards of directors of certain types of corporations, owners of professional corporations, general partners, and managing members of limited liability companies.
California Labor Code (Sections 3351 and 3352) governs the exclusion of these individuals. Effective July 1, 2018, the individuals who may elect to exclude themselves from coverage if they meet the requirements for exclusion include:
Effective July 1, 2018, a sole shareholder who is an officer or director of a private corporation or a private cooperative corporation, or who is an owner of a private professional corporation, is 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. There are additional waiver requirements for officers or members of the board of directors of a cooperative corporation and owners of a professional corporation.
See the Related Documents below for sample waiver forms and additional guidance published by the California Department of Insurance.
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, Subrules j – m and p of the California Workers' Compensation Uniform Statistical Reporting Plan—1995. These limits are subject to annual adjustments.
The following is information regarding recent changes to Labor Code Sections 3351 and 3352:
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