Upcoming Workers’ Compensation Changes for All California Contractors (Effective 2026)
Significant updates to California’s Workers’ Compensation requirements will impact all licensed contractors by early 2026. Below is a clear breakdown of what’s changing and how to prepare.
Background
Senate Bill No. 216, approved on September 30, 2022, introduced major shifts to Workers’ Compensation rules for contractors.
Phase 1 (Already in Effect):
Concrete, HVAC, Asbestos Abatement, and Tree & Palm contractors are currently required to carry Workers’ Compensation insurance even if they do not have employees. Proof of coverage must be filed with the Contractors State License Board (CSLB).
Phase 2 (Effective January 1, 2026):
The second phase will expand this requirement to all licensed contractors in California. Every active license holder will need to maintain a valid Workers’ Compensation policy — regardless of whether they employ anyone. This policy must be reported to the CSLB in order to keep a license in Current and Active status.
These requirements do not apply to contractors whose licenses are in inactive status.
Why This Change Is Happening
The goal of SB 216 is to better protect workers across the state. Of the roughly 230,000 licensed contractors in California, about 55% claim to have no employees. However, CSLB research shows that many of these exemptions are inaccurate or misused, leaving workers exposed to significant risk if they’re injured without proper coverage in place.
Failing to carry Workers’ Compensation insurance is more than a compliance issue — it’s a criminal offense. Penalties can include fines, jail time, and automatic suspension of your contractor license until valid coverage is filed with the CSLB.
How to Prepare Now
If you don’t currently have a Workers’ Compensation policy, now is the time to get ahead of the upcoming changes. Here’s how:
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Connect with a Qualified Insurance Agent
Working with a knowledgeable broker makes the process far easier. Starting early gives you time to compare rates, understand your options, and secure the right policy before the deadline. -
Ask About Discounts and Payment Plans
Many carriers offer credits, discounts, or flexible installment plans. Your broker can help identify cost-saving opportunities that fit your business. -
Accurately Calculate Payroll If You Plan to Hire
Workers’ Compensation premiums are based on payroll and classification rates. If you’re planning to bring employees onboard, ensure your projected payroll is as accurate as possible to avoid unexpected adjustments later.
Staying proactive now will ensure your business remains compliant once the 2026 requirements take effect — and more importantly, it will protect you, your workers, and your license.