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Can Owners and Officers Opt Out of Workers' Comp in California?
California's rules for corporate officers and directors, sole shareholders, partners, LLC managing members and sole proprietors, from Labor Code sections 3351 and 3352 and the Department of Insurance.
Yes, in specific cases. In California, corporate officers and directors who work for the corporation for pay are employees and must be covered (Labor Code §3351(c)). An officer or director can opt out by signing a written waiver if they own at least 10% of the stock, or at least 1% when a parent, grandparent, sibling, spouse or child owns at least 10%, and they have health insurance or a health care service plan (Labor Code §3352(a)(16)).
An officer or director who is the sole shareholder is excluded unless the business elects coverage, and general partners and LLC managing members can waive in writing (Labor Code §3352(a)(16)(B) and (a)(17)). A sole proprietor is covered only if the policy or an endorsement clearly includes them (California Department of Insurance).
This page covers California only, and its sources were checked on October 3, 2026. For the state's other employer requirements, see our California business insurance guide; for how the coverage works, see the workers' compensation insurance guide.
The rules by type of owner
| Who | California default | How to opt out or in | Source |
|---|---|---|---|
| Corporate officer or director working for pay | Employee; must be covered | May opt out by written waiver if they own at least 10% of the stock (or 1% with a family member at 10%) and have health coverage | §3351(c), §3352(a)(16)(A) |
| Officer or director who is the sole shareholder | Not an employee | Covered only if the officer, director or corporation elects coverage, for example by insuring it under §4151(a) | §3352(a)(16)(B), §4151 |
| Working partner or LLC member paid wages irrespective of profits | Employee; must be covered | A general partner or managing member may opt out by written waiver | §3351(f), §3352(a)(17) |
| Owner-practitioner of a professional corporation | Employee when serving as a paid officer or director under §3351(c) | May opt out by written waiver stating they have health coverage; a sole shareholder is excluded unless coverage is elected | §3352(a)(18) |
| Sole proprietor | The coverage requirement applies to employees | Covered only if inclusion is clearly stated in the policy or added by endorsement | California Department of Insurance |
Cooperative corporations have a separate officer and director waiver in §3352(a)(19) that also requires disability coverage comparable to workers' compensation (Labor Code §3352).
If you are included, your pay can enter the premium calculation. To see what an owner's payroll adds to a premium subtotal, enter the figures in the workers' comp and EMR calculator.
How the officer and partner waivers work
Section 3352 sets the same mechanics for the officer, director, partner and LLC waivers (Labor Code §3352(a)(16)-(17)):
- It must be in writing and under penalty of perjury, stating that you are a qualifying officer, director, general partner or managing member.
- It takes effect when the insurer receives and accepts it. With your consent, the insurer may backdate acceptance up to 15 days before it received the waiver.
- The insurer does not have to verify it. The insurer, agent and broker are not required to investigate or confirm the facts in the waiver.
- It means no benefits for you. The law creates a conclusive presumption that a person who signs the waiver is not covered by workers' compensation.
- It lasts until you withdraw it in writing to the insurer.
The officer and director waiver also requires that you be covered by a health insurance policy or a health care service plan. The Department of Insurance summarizes the same conditions (California Department of Insurance).
A hypothetical example: two siblings each own 50% of a California landscaping corporation and both serve as paid officers. Each owns at least 10%, so each may sign a waiver if they have health coverage. If one sibling later sells most of their shares to an outside investor and keeps 5%, they can still qualify under the 1% branch, because a sibling owns at least 10%. An unrelated officer holding the same 5% would not qualify (Labor Code §3352(a)(16)).
Sole proprietors
California employers must provide workers' compensation benefits to their employees under Labor Code section 3700. A sole proprietor who wants coverage for themselves must have that inclusion clearly stated in the policy or added as an endorsement. The Department of Insurance notes that a policy covering only a sole proprietor may not be the best choice, and that health, life or disability income insurance can be alternatives (California Department of Insurance).
Some contractors need a policy even with no employees. The Contractors State License Board says all active C-8 Concrete, C-20 HVAC, C-22 Asbestos Abatement, C-39 Roofing and C-61/D-49 Tree Service contractors must carry workers' compensation insurance or a valid certification of self-insurance whether or not they have employees (CSLB). Once you hire an employee, that employee must be covered (California Department of Insurance).
What inclusion changes at audit
California workers' compensation premium starts from an estimated payroll, and the final premium is set after the policy ends and payroll is audited. If payroll was higher than estimated you owe more; if lower, the insurer returns the difference. Insurers can generally audit during the policy period and for three years after it ends (California Department of Insurance).
An included officer, partner or member is part of that payroll, so tell the insurer when an owner's status, ownership share or pay changes during the term. Ask the insurer what payroll amount it will use for each included owner and which classification applies to the owner's work. Our guide to a wrong workers' comp class code explains how codes are assigned, and our workers' comp cost guide shows how payroll and rates combine.
Records to have ready
- Formation documents and current ownership percentages for each owner, officer, partner or member
- Proof of health coverage for any officer or director who will sign a waiver
- Copies of every signed waiver and the insurer's acceptance date
- The policy Information Page and any endorsement that includes or excludes an owner
- Owner pay records for the policy period: W-2 wages, guaranteed payments or draws
If you want help with the coverage questions for your ownership structure, you can request coverage help from PolicyBenchmark.
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This content is for informational purposes only and does not constitute insurance advice. Always consult with a licensed insurance professional before making coverage decisions.