Oct 5

If Your Employer Is Uninsured, Are You “Straight Outta Comp”?

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California law imposes a duty on an employer, regardless of how many employees he has, to secure the payment of workers’ compensation, either by liability insurance or by a certificate of consent to self-insure.[1] The employer remains under that duty even if he only has one employee and even if that one employee’s job is so cushy that he’ll probably never injure himself at work.[2] The failure to secure the payment of workers’ comp by one who knew or should have known of that duty is a crime: being “illegally uninsured.”[3] The punishment for that crime can be massive: up to $100,000 in penalties – even if the employee’s injury isn’t compensable.[4]

You might be worrying about what to do if you hurt yourself on the job and discover that your employer is “straight outta” comp insurance. “Eazy” does it. Fortunately, California law doesn’t won’t let an illegally uninsured employer leave an injured employee holding the bag. If an employer is illegally uninsured, the employee will automatically get a 10% increase in his workers’ comp award. Even better, he  can file a civil action against his employer for remedies that normally would be unavailable to an employee who suffers a workplace injury: damages for pain and suffering and, in some cases, punitive damages.

How to Get a 10% Bump in Workers’ Compensation from an Illegally Uninsured Employer

If an employer is illegally uninsured, an injured employee can file a claim with the Uninsured Employers Benefits Trust Fund (UEBTF).[5] The workers’ comp judge (WCJ) will then order the employer to pay a 10% penalty on top of any ordinary comp award from the UEBTF.[6] For example, an award of $50,000 in permanent disability indemnity and $50,000 in future medical care instantly becomes an award of $110,000. The employer’s lack of workers’ comp insurance is prima facie evidence that he willfully failed to secure the payment of workers’ comp. In other words, he has the burden of proving that his failure to secure the payment of workers’ comp wasn’t willful.

Easier said than done. The only way an illegally uninsured employer can prove that his failure to secure the payment of workers’ comp wasn’t willful is if he can show that he inadvertently failed to secure the payment of workers’ comp or somehow unwittingly became an employer.[7] That means he can’t avoid the penalty just by writing an injured employee a huge check for his medical care and giving him some “walking around money.” Even an employer who has the best workers’ comp insurance policy in the world won’t avoid the penalty if he knew his carrier couldn’t write workers’ comp insurance in California.[8]

How to Get Personal Injury Damages from an Illegally Uninsured Employer

Generally, workers’ comp is an employee’s exclusive remedy for an injury that arises out of, and occurs in the course of, his employment.[9] The “exclusive remedy” rule bars an employee from filing file a civil action against his employer for tort damages (e.g., damages for pain and suffering) to compensate the injury. If an employer is illegally uninsured, however, the “exclusive remedy” rule doesn’t apply. The employee will be able to maintain both a workers’ comp claim and a civil action – and he doesn’t need to elect between the two remedies (though the court will offset a workers’ comp award against a civil award to prevent a double recovery).[10]

The law ties an employer’s hands when he’s illegally uninsured. His willful failure to secure the payment of workers’ comp gives rise to a rebuttable presumption that he was negligent and strips him of his ability to assert the usual affirmative defenses to negligence – comparative negligence, assumption of the risk, or the negligence of the employee’s fellow servant.[11] That means an employee who injures himself on the job because he was goofing off might yet win. Moreover, the usual two-year statute of limitations for bringing a personal injury case doesn’t apply when an employer is illegally uninsured. Instead, the statute of limitations will be three years.[12]


[1] Lab. Code §3700.

[2] Bradshaw v. Park, 29 Cal.App.4th 1267, 1274 (1994).

[3] Lab. Code §3700.5.

[4] Lab. Code §3722(b).

[5] Lab. Code §3716.

[6] Lab. Code §4554.

[7] Self-Insurers’ Security Fund v. ESIS, 204 Cal.App.3d 1148 (1988).

[8] Huffman v. City of Poway, 84 Cal.App.4th 975 (2000).

[9] Lab. Code §3600.

[10] Lab. Code §3715(a).

[11] Lab. Code §3708.

[12] Valdez v. Himmelfarb, 144 Cal.App.4th 1261 (2006).

Ben Rothman, Esq.

Ben Rothman is a Los Angeles-based attorney practicing in the areas of personal injury, employment, and workers' compensation on a "no recovery, no fee" basis. Call him at (424) 465-2948 for a free, no-obligation consultation.