What happens if my workers' compensation policy is canceled?

Two things happen at once: you become an uninsured employer under the Labor Code, and your CSLB license becomes subject to suspension. Both start on the cancellation date, not when you notice.

Licensing. CSLB requires an active license to have a certificate of workers' compensation insurance (or a valid no-employee exemption) on file. Failure to maintain required coverage results in license suspension, and work performed while suspended is unlicensed work. Under B&P §7031, a contractor not properly licensed at all times during a job generally cannot sue to collect for it, and the customer may sue to recover what they paid. Treat a lapse as a shutdown, not a paperwork problem.

The Labor Code. If employees work during the gap, you are exposed to the state's uninsured-employer penalties: a misdemeanor under Labor Code §3700.5 (fine of at least $10,000 and/or up to a year in county jail), a stop order barring you from using employee labor until coverage is in place, and a civil penalty of the greater of twice the premium you should have paid or $1,500 per employee. If someone is hurt during the gap, you pay the injury costs yourself and can be sued civilly.

What to do. If cancellation was for non-payment, call the carrier or your producer immediately; reinstatement without a lapse may still be possible. If not, replacement coverage must be bound and a new certificate sent to CSLB before your crew works another day.