Who can be left off a California workers' compensation policy, the ownership percentage each entity type needs, how the waiver works, and what it means for your premium.
California counts corporate officers and directors, working LLC members, and working partners as employees for workers' compensation unless they qualify to be excluded. Whether you can be left off the policy depends on your entity type and, for corporations, how much stock you own.
Corporations: an officer or director who owns 10% or more of the stock can be excluded by signing a waiver. LLCs and partnerships: only a managing member or general partner can be excluded, and there is no minimum ownership. A sole shareholder is excluded automatically.
The 10% figure applies to policies effective July 1, 2018 and later. Between 2017 and mid-2018 the minimum was 15%, so older articles that quote 15% are out of date.
| Entity type | Who can be excluded | Ownership minimum | Other requirements |
|---|---|---|---|
| Corporation | Officer or director | 10% of the issued and outstanding stock, or 1% if a parent, grandparent, sibling, spouse, or child owns 10% or more | Signed waiver. The 1% route also requires the person to have health insurance |
| Corporation with a sole shareholder | The sole shareholder, if an officer or director | 100% | Excluded automatically, with no waiver, unless they elect coverage |
| LLC | Managing member only | None | Signed waiver. Other members who are paid wages are employees |
| Partnership | General partner only | None | Signed waiver |
| Professional corporation | Owner who personally provides the corporation's professional services | None | Health insurance and a signed waiver. The owner gives a copy of the waiver to the other owners |
| Cooperative corporation | Officer or director | None | Health insurance, a disability policy comparable to workers' comp, and a signed waiver. State Fund asks cooperatives to get written California Department of Insurance approval of the disability policy first |
If shares or interests are held in a revocable trust, the person who holds the power to revoke the trust is treated as the owner and qualifies the same way as that entity type.
Three more points worth knowing:
An excluded person's payroll is left out of your premium calculation, and the person is not eligible for workers' comp benefits. Officers and partners who stay on the policy are charged on their actual pay, subject to a minimum and a maximum that the WCIRB sets and adjusts for each policy period. That minimum can add premium even when an owner's actual pay is lower.
The trade-off is protection: an excluded owner has no workers' comp coverage for themselves, so confirm you have health and disability coverage before signing a waiver. We can show you the premium both ways before you decide.
Excluding an owner from the policy does not change your contractor license requirements. CSLB requires C-8 (concrete), C-20 (HVAC), C-22 (asbestos abatement), C-39 (roofing), and C-61/D-49 (tree service) licensees to carry workers' comp whether or not they have employees. A license qualified through a responsible managing employee cannot use the no-employees exemption, and having employees ends it. CSLB's report to the Legislature says coverage is required for all licensees starting January 1, 2028. See our SB 216 and SB 1455 contractor guide for the full timeline.
For a corporation, an officer or director needs at least 10% of the stock, or at least 1% if a parent, grandparent, sibling, spouse, or child owns 10% or more and the person has health insurance. LLC managing members and general partners have no minimum. In every case the person must sign a waiver that the carrier accepts.
Only through the family route: you own at least 1%, a parent, grandparent, sibling, spouse, or child owns 10% or more, you have health insurance, and you sign a waiver. Otherwise you stay on the policy. State Fund requires health insurance only for officers under 10%, but some carriers ask every officer about it, so confirm with your carrier.
No. The rule turns on role, not percentage: only a managing member can be excluded. Other members who are paid wages are treated as employees.
Only for a sole shareholder, who is excluded unless they elect coverage. Everyone else needs a signed waiver that the carrier has received and accepted.
The waiver creates a conclusive presumption that the person is not covered by workers' compensation benefits, so the policy pays no workers' comp benefits for that person.
Yes. For policies effective July 1, 2018 and later, the minimum for corporate officers and directors is 10%. From 2017 until then it was 15%, so older articles that quote 15% are out of date.
General information, not legal advice. Eligibility for exclusion is set by the Labor Code and applied by your carrier. Confirm your situation with your carrier or legal advisor before anyone signs a waiver.
Applying for coverage? Our contractor application checks each owner's ownership percentage against these rules as you fill it out.
Send us your ownership structure and we will tell you who can be excluded, what a waiver requires, and what it does to your premium.
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