Workers' compensation insurance is mandatory for any employer in California. But the exposure doesn't stop at your own employees. Under California law, if a subcontractor you hired fails to carry workers' compensation and one of their workers is injured on your jobsite, the Labor Commissioner can treat you — the GC — as the employer of record for that worker.
The "Unlicensed Sub = Your Employee" Rule
California Labor Code Section 2750.5 creates a legal presumption that any worker performing services for which a contractor's license is required is an employee — not an independent contractor — unless they hold a valid contractor's license. If your sub is unlicensed, every worker they bring on your job is presumed to be your employee.
The Cost of Getting This Wrong
- Stop Work Orders issued by the DIR can shut down your entire project
- Fines of $1,500 per employee per day of uninsured operation
- The injured worker can sue you directly in civil court
- Your own general liability policy may not cover these claims
Minimum Protection Steps
- Verify workers' comp coverage through the DIR database before any sub starts work
- Require subs to list you as certificate holder so you receive cancellation notices
- Re-verify coverage every 60-90 days on longer projects
- Never allow a sub to start work without verified, current coverage on file
