Do I need workers' comp insurance if I have employees?

Yes. California requires every employer to secure workers' comp (Labor Code section 3700), and a CSLB licensee with employees cannot use the no-employee exemption. Since 1 January 2026, SB 291 sets a minimum civil penalty of $10,000 per violation for a sole owner, and $20,000 for an entity, that employs workers without coverage.

What happens if my workers' comp lapses under SB 291?

If your license requires workers' comp and the coverage lapses, CSLB can suspend the license, and a GC that checks your license will see it. If you employ anyone while uncovered, section 7125.4 as amended by SB 291 makes that cause for discipline with the minimum penalties above, and CSLB will not renew or reinstate the license until a current certificate is filed.

Does a ghost policy satisfy SB 291 requirements?

Not if you have employees. A ghost policy (owner-excluded, zero-payroll workers' comp) does not cover employees, so employing W-2 workers under it is still employing them without coverage.

Is SB 291 a federal requirement or California-only?

SB 291 is California-only and administered by the Contractors State License Board (CSLB). It is not a nationwide US federal requirement.

Why did California pass SB 291?

To make the workers' comp exemption harder to misuse. SB 291 raised the penalties for employing workers without coverage or filing a false exemption, requires CSLB's verification of exemption claims to use an audit, proof or other evidence, and requires CSLB to report its proposed verification process to the Legislature by 1 January 2027.

California SB 291: Workers' Comp Penalties for Contractors

Q: What is SB 291 and when does it take effect?

SB 291 (Stats. 2025, ch. 455) is a California law approved on 7 October 2025 and in effect since 1 January 2026. It raises the penalties in Business and Professions Code section 7125.4 for a licensee who employs workers without workers' comp or files a false exemption, and it tightens how CSLB verifies exemption claims. It does not phase in a coverage mandate: the date when every licensee must carry workers' comp is 1 January 2028, under SB 216 as amended by SB 1455.

SB 291 is not a phase-in mandate. Since 1 January 2026 it raises CSLB penalties for employing workers without workers' comp and tightens exemption checks. The all-licensee rule starts 1 January 2028.

This content is general information only and is not legal, tax, financial or insurance advice. Speak to an appropriately licensed professional before acting on it.

🎯 SB 291 (Stats. 2025, ch. 455) is a penalties-and-verification law, not a new coverage mandate. Approved on 7 October 2025 and in effect since 1 January 2026, it amends Business and Professions Code section 7125.4: a licensee who employs workers without workers' comp, or files a false exemption, faces a minimum civil penalty of $10,000 per violation for a sole owner and $20,000 for an entity, and CSLB will not renew or reinstate the license until a certificate is filed. The date when every licensee must carry workers' comp comes from a different law: SB 216, as delayed by SB 1455, sets it at 1 January 2028. This is a California rule, not a nationwide US requirement.

As of 19 October 2026. Every legal fact on this page links to the California statute it comes from. California only.

This guide is drawn from the chaptered bill text and the current statute on California Legislative Information, not vendor materials.

TL;DR

SB 291 did not change who must carry workers' comp. Every employer already had to (Labor Code § 3700), and a license holding C-8, C-20, C-22, C-39 or D-49 must carry it even with no employees (Business and Professions Code § 7125(b)).
It raised the penalties in § 7125.4: a minimum of $10,000 per violation for a sole owner, $20,000 for a partnership, corporation, LLC or other entity, and up to $30,000 per occurrence in total for later violations. The qualifier can be guilty of a misdemeanor, and the license is not renewed or reinstated until a certificate is filed.
It requires CSLB's check of exemption claims to use an audit, proof or other evidence, and CSLB must report its proposed process to the Legislature by 1 January 2027. (SB 291)
The all-licensee requirement starts 1 January 2028 (SB 216 as amended by SB 1455). After that, only a joint venture with no employees can be exempt.
A ghost policy (owner-excluded, zero-payroll workers' comp) does not cover employees. If you have W-2 workers, they are still uncovered.

What is SB 291 for subcontractors with employees?

SB 291 is the 2025 California Senate bill that raised the penalties for a CSLB licensee who employs people without workers' comp, and tightened how CSLB checks exemption claims. It did not remove the no-employee exemption. That happens on 1 January 2028, under SB 216 as amended by SB 1455. (SB 291, SB 1455)

For a subcontractor who just hired a first crew member, the risk is direct: once someone is on payroll, an exemption on file is no longer true, and section 7125.4 makes employing that person without coverage, or hiring after filing an exemption without first filing a certificate, cause for discipline.

Definition — SB 291 (Stats. 2025, ch. 455): A California statute, in effect since 1 January 2026, that amends Business and Professions Code section 7125.4 to set minimum civil penalties for employing workers without workers' comp or filing a false exemption, and requires CSLB to verify exemption claims with evidence. It does not set a coverage phase-in. Source: California Legislative Information, SB 291 chaptered text.

Why SB 291 exists now, and what most contractors miss

Before SB 291, a licensee could claim the no-employee exemption with a self-certified statement, and the penalty floor for getting it wrong was lower. SB 291 makes a false claim more costly and asks CSLB to check claims with an audit, proof or other evidence.

Here is what most subs miss. Workers' comp is a licensing condition, not just an insurance best practice. If a license that requires workers' comp loses its coverage, CSLB can suspend it, and a GC's prequalification team that pulls your license status will see that. See what happens to a CSLB license when workers' comp lapses.

Two more points subs routinely overlook:

A "ghost policy" does not count once you have employees. Owner-only, zero-payroll policies exist to satisfy a certificate request when you genuinely have no W-2 staff. The instant you put someone on payroll, that policy no longer reflects your exposure, and relying on it leaves you both out of compliance and uninsured for the actual claim.
The date is 2028, not 2026. Many pages still say every licensee needed workers' comp from 1 January 2026. SB 1455 moved that to 1 January 2028. Today, C-8, C-20, C-22, C-39 and D-49 licenses must carry it even with no employees; every other license can still file an exemption if it truly has none. (§ 7125)

For how CSLB administers this, see the CSLB workers' compensation requirements page and, for how coverage works in California generally, the California Department of Industrial Relations workers' compensation overview.

What a subcontractor should actually do

Check your classifications. If your license holds C-8, C-20, C-22, C-39 or D-49, you need a workers' comp certificate on file now, employees or not.
If you have any W-2 employees, bind a real workers' comp policy — not a ghost/owner-excluded policy — and confirm it reflects your actual payroll classes.
If you are exempt, make sure it is still true. Hiring after filing an exemption without first filing a certificate is cause for discipline under § 7125.4.
Keep a current certificate ready for GC prequalification. A subcontract can require one whatever the statute says.
Plan for 1 January 2028, when the exemption ends for every license except a joint venture with no employees.

Frequently asked questions

Is SB 291 a federal law? No. SB 291 is a California state statute administered by the Contractors State License Board. It applies only to CSLB-licensed contractors.

Does a ghost policy satisfy SB 291? Not if you have employees. Owner-excluded, zero-payroll policies do not cover W-2 workers, so employing staff under one is still employing them without coverage.

What happens if my coverage lapses? If your license requires workers' comp, CSLB can suspend it. If you employ anyone while uncovered, the SB 291 minimum penalties apply, and the license is not renewed or reinstated until a certificate is filed.

When does it apply to my licence? SB 291 applies to every licensee from 1 January 2026; it is not a phase-in by classification. The separate rule that every licensee must carry workers' comp starts 1 January 2028.

Sources

Every legal statement above is taken from these primary sources, each read on 19 October 2026. Laws change: check the source before you rely on a date or an amount.

Business and Professions Code section 7125 (current version, and the version operative 1 January 2028). Read 19 October 2026.
Business and Professions Code section 7125.4 (as amended by SB 291, Stats. 2025, ch. 455). Read 19 October 2026.
SB 216 (Dahle), Stats. 2022, ch. 978, chaptered text. Read 19 October 2026.
SB 1455 (Ashby), Stats. 2024, ch. 485, chaptered text, approved 22 September 2024. Read 19 October 2026.
SB 291 (Grayson), Stats. 2025, ch. 455, chaptered text, approved 7 October 2025. Read 19 October 2026.
California Labor Code section 3700. Read 19 October 2026.
CSLB, Workers' Compensation Requirements. Read 19 October 2026.