How California Treats LLC Members and Workers Compensation
In California, an LLC member is generally not considered an employee under workers compensation law unless they elect coverage. This distinction matters because the policy's purpose is to cover workplace injuries for employees, and members typically manage the LLC rather than work under it. California Labor Code Section 3351 and related regulations create a specific path that lets single-member and multi-member LLCs limit or exclude member coverage, provided the right steps are taken.
More from this site
Keep reading the latest coverage
The rule is not automatic. A member who performs work for the LLC and gets injured may still face a coverage gap if the exclusion was not properly documented and filed with the insurance carrier and the state. Because California enforces workers compensation strictly, missing a filing step can leave the LLC personally liable for medical costs and lost wages that a policy would otherwise handle.
Single-Member LLC Exclusion Rules
A single-member LLC in California can exclude the sole member from workers compensation coverage. The member must complete a waiver, often called the Members' or Managers' Compensation Coverage Election and Waiver, and provide it to the insurance company before the policy is bound or renewed. Once the waiver is on file, the member is treated as an excluded owner, not an insured employee, for workers compensation purposes.
This exclusion does not remove the member's general liability exposure or other business risks. It only adjusts who is covered under the workers compensation policy. If the member later performs hands-on work that is more employee-like and the LLC has not properly documented the exclusion, a dispute with the carrier or a claim could arise.
Multi-Member LLC and Multiple Member Exclusion
When an LLC has more than one member, California allows each member to elect whether to include or exclude themselves from coverage. Every member who wants the exclusion must sign the individual waiver form. The LLC cannot exclude a member who has not consented, and the policy must reflect each member's election accurately.
For multi-member LLCs, the process typically requires:
- A completed waiver or election form for each member
- Clear documentation of each member's ownership percentage and role
- Carrier acknowledgment that the exclusions are noted on the policy
If one member is excluded and another is included, the policy must be structured so that the included member is properly classified and rated, while the excluded member is listed with the appropriate waiver on record.
What Happens If a Member Is Injured Without Coverage
An excluded LLC member who is injured while performing LLC work generally cannot file a standard workers compensation claim against the LLC's policy. California law does not provide a fallback state fund for excluded members in most cases, so the member may need to rely on personal health insurance or pursue a civil claim if another party's negligence caused the injury.
This outcome reinforces why the election and waiver process must be done correctly before any work begins. An LLC that assumes the exclusion is in place without the signed waiver and carrier confirmation is taking a significant financial risk.
Practical Steps for LLCs in California
LLCs that want to exclude members should start by reviewing the specific waiver form required by their workers compensation carrier. The form must be completed accurately, signed by each member, and retained with the insurance documents. It is also wise to keep a copy in the LLC's records and confirm that any new members or changes in ownership trigger a review of the election.
Because rules can vary by carrier and by the nature of the LLC's activities, checking directly with the insurance provider and, when needed, a California employment law attorney helps ensure the exclusion holds up when it matters most.