Insurance and Bond Requirements

Why This Matters

CSLB's Law and Business study guide includes "Insurance and Liens," covering workers' compensation insurance and business insurance, and "Public Works," which includes bonding and insurance requirements. The key skill is separating what the law requires from what a smart contractor buys anyway, and knowing exactly what happens to the license when required coverage lapses.

Workers' Compensation: Required for Employees

• The rule: every employer except the state must secure the payment of workers' compensation, either by insurance from a company authorized to write it in California or by a certificate of consent to self-insure from the Director of Industrial Relations (Labor Code 3700).
• Timing: coverage must be in place before the first employee starts work, and CSLB must have your certificate on file, replacing any exemption (Labor Code 3700; B&P 7125).
• No employees: under the current version of B&P 7125, a licensee with no employees may file an exemption with CSLB, certifying that it employs no one and is not otherwise required to carry coverage.
• Classifications that cannot use the exemption: C-8 concrete, C-20 HVAC, C-22 asbestos abatement, C-39 roofing and D-49 tree service licensees must carry workers' compensation even with no employees (CSLB). The C-36 plumbing classification is not on that list today.
• Coming change: under SB 1455 (2024), mandatory workers' compensation for all licensees, regardless of whether they have employees, takes effect January 1, 2028. Until then, licensees in the other trades can keep claiming the exemption if they have no employees (CSLB industry bulletin). Watch for further changes before that date.
• Workers' compensation also shows up in your contracts: a home improvement contract must contain a workers' compensation notice stating either that the contractor has no employees and is exempt, or that it carries workers' compensation insurance for all employees (B&P 7159).