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Who is exempt from workers' comp in California

By Richard Vaughn CPCU, ARM, AIS. Reviewed November 8, 2026. Richard is an insurance professional, not an attorney. This page explains the law; it is not legal advice.

Start from the presumption

California's definition of employee is deliberately wide: anyone in the service of an employer under any appointment or contract of hire, oral or written, lawful or unlawful (Labor Code §3351). Exemptions are the exceptions carved from that, and they are listed exhaustively in Labor Code §3352(a). If a working person is not on the list, they are an employee and must be covered. The list below is the complete set that matters to a private employer; the rest are peace-officer and student-athlete categories.

Owners

Sole proprietors. A sole proprietor with no employees is not an employee of anyone and has no coverage obligation. The business becomes an employer with its first hire. A sole proprietor can elect to be covered under the business's policy, and licensed contractors and some client contracts require proof of coverage even with no employees.

Corporate officers and directors. An officer or director of a private corporation who renders actual service for pay is an employee (Labor Code §3351(c)). They can be excluded if they own at least 10% of the issued and outstanding stock and sign a sworn waiver stating that they qualify (Labor Code §3352(a)(16)). The threshold is 1% if a parent, grandparent, sibling, spouse or child owns at least 10% and the officer is covered by a health care plan. A sole shareholder is excluded automatically unless the corporation elects coverage.

General partners and LLC managing members. A working partner or member who receives wages is an employee (Labor Code §3351(f)). A general partner or a managing member of an LLC can be excluded by signing a sworn waiver stating that they are one; no ownership percentage applies (Labor Code §3352(a)(17)).

Professional corporations. An owner-practitioner of a professional corporation can be excluded by signing a waiver stating that they have health coverage (Labor Code §3352(a)(18)). Cooperative corporations have a parallel rule requiring both health coverage and disability insurance comparable to workers' compensation (Labor Code §3352(a)(19)).

In each case the waiver takes effect only when the insurer receives and accepts it, and a person who has signed one is presumed not to be covered. An officer who signs a waiver and is then badly hurt on the job has no workers' compensation claim, which is the trade for the premium saved.

Household employment

A household worker, meaning someone employed by a homeowner or occupant to do work related to the household, including child care, is an employee (Labor Code §3351(d)) unless, in the 90 days before the injury, they were employed fewer than 52 hours or earned $100 or less (Labor Code §3352(a)(8)). A household worker employed by a parent, spouse or child is excluded entirely (Labor Code §3352(a)(1)). A regular nanny or caregiver is above the threshold in the first two weeks.

Volunteers and amateurs

Unpaid volunteers for a public agency or a nonprofit who receive only meals, lodging, transportation or incidental expense reimbursement are excluded (Labor Code §3352(a)(9)), as are volunteers at nonprofit recreational camps and ski patrols on the same terms, amateur athletes and non-regular officials paid only expenses or a per-diem stipend, and participants in nonprofit self-help housing programs. A person receiving only aid or sustenance from a religious or charitable organization is excluded (Labor Code §3352(a)(2)). Pay, beyond expenses, moves a volunteer into employee status; a public agency or nonprofit can elect to cover its volunteers.

Independent contractors

Independent contractors are not employees, but the burden of proving someone is one falls on the hiring business. Since 2020 the ABC test applies: a worker is presumed to be an employee unless the business shows the worker is free from its control, does work outside the usual course of its business, and is customarily engaged in an independently established trade of the same nature (Labor Code §2775(b)(1); §3351(i)). Statutory exceptions for listed professions and qualifying business-to-business contracts route those relationships to the older Borello multi-factor test instead. A 1099, a written contract or the worker's own preference does not settle the question. The independent contractors page covers the test and the exposure when a subcontractor turns out to be uninsured.

What exemption does not do

An exclusion removes a person from coverage and from reportable payroll. It does not remove the employer from the system: a business with one covered employee must have a policy, and the excluded officer's injury, if it happens, is handled outside workers' compensation, by health and disability insurance if any, with the possibility of a lawsuit that the compensation bargain would otherwise bar. The penalties page explains what happens when an employer with employees relies on an exemption that does not apply.

Questions people ask

Richard Vaughn CPCU, ARM, AIS

Richard Vaughn spent 35 years in commercial property and casualty insurance, most of it in workers' compensation: running a self-insured group, auditing premiums, and implementing claims systems for carriers and third-party administrators. He is not an attorney. dickvaughn.com