Workers CompensationQuestion 203 of 53189% of test-takers answer this correctly

What is a possible penalty when a California employer is found operating without required workers' compensation coverage?

a.A written warning from the Division of Labor Standards Enforcement on the first offense only, with no fine, no stop-order and no criminal referral to the district attorney
b.A criminal misdemeanor charge plus monetary penalties and a stop-order shutting down the business until coverage is obtained
c.A one-year waiting period imposed by the Department of Insurance before the employer may apply for any workers' compensation policy, including through the State Fund
d.Automatic cancellation of the employer's federal employer identification number by the IRS

Explanation

Failure to carry workers' compensation in California is a misdemeanor. Under Labor Code §3722, the Director of Industrial Relations may issue a stop-order halting business operations until coverage is in place, plus assess civil penalties (commonly cited at $1,500 per employee under the stop-order, with additional minimums). The employer also remains directly liable for any work injury costs.

Law Reference: Cal. Labor Code §3722

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