SB 189 California Workers’ Comp Exclusion: Who Can Waive Coverage

California’s SB 189 rewrote the workers’ compensation exclusion rules for business owners and executives, and the California workers’ comp exclusion rules it put in place turn on your role, your ownership stake, and in most cases whether you carry health insurance. The law amended Labor Code Sections 3351 and 3352 to tighten who may waive coverage, add a health insurance condition for several categories, and pull revocable trust holders into the definition of “employee.”¹

If you own or help run a California corporation, partnership, or LLC, the sections below walk through who can opt out, what each category has to prove, and what happens when a waiver is signed.

Who Can Waive Coverage

Labor Code Section 3352, as amended by SB 189, sorts eligibility by business structure. The thresholds and documentation differ in meaningful ways.

Corporate Officers and Directors

An officer or director of a private or quasi-public corporation can waive workers’ comp coverage only if two conditions are met. The person must own at least 10% of the corporation’s issued and outstanding stock, or at least 1% if a parent, grandparent, sibling, spouse, or child owns at least 10%. The person must also be covered by a health insurance policy or health care service plan.²

The health insurance condition is one of SB 189’s most consequential additions. Before the bill, officers and directors could opt out with a lower ownership threshold and no proof of alternative coverage.

A sole shareholder who is also an officer or director of a private corporation is handled differently. That person is automatically excluded from the employee definition and does not need to file a waiver at all, though they can voluntarily elect into coverage under Labor Code Section 4151.³

General Partners and Managing Members of LLCs

General partners and LLC managing members who receive wages from the business are employees under Labor Code Section 3351(f).⁴ They can waive coverage by submitting a written statement under penalty of perjury confirming they are a qualifying general partner or managing member. No specific ownership percentage applies, and there is no health insurance requirement for this category.³

Professional Corporation Owners

Owners of professional corporations organized under Corporations Code Section 13401 — law firms, medical practices, accounting firms, and the like — can waive coverage if they personally render the services the corporation is organized to provide. The waiver must be in writing and signed under penalty of perjury, and the owner must carry a health insurance policy or health care service plan. The owner also has to give a copy of the waiver to every other owner, and the corporation must keep a copy on file.³

Cooperative Corporation Officers and Directors

Officers and board members of cooperative corporations face the steepest requirements. On top of a written waiver signed under penalty of perjury and proof of health insurance, they must also carry a disability insurance policy comparable in scope and coverage to a workers’ compensation policy. Copies of the waiver go to every other officer or board member, and the cooperative keeps one on file.³

Revocable Trust Holders Are Now Employees

Before SB 189, business owners who held their shares or membership interests through a revocable trust occupied an ambiguous status for workers’ comp purposes. SB 189 closed that gap. Anyone with the power to revoke a trust that owns shares in a private corporation or holds general partnership or LLC interests is now treated as an employee under Labor Code Section 3351(g).⁴

If you hold your interest through a revocable trust, the business’s workers’ comp policy has to cover you unless you qualify for and sign a waiver. A trust holder who would otherwise qualify as an officer or director under Section 3351(c), or as a working partner or managing member under Section 3351(f), can pursue a waiver through that same pathway if all the eligibility criteria are met.¹ If the person doesn’t meet those criteria, they stay covered.

How a Waiver Takes Effect

The procedure is consistent across business structures, with the documentation differences noted above. The core rules:

The waiver must be in writing and signed under penalty of perjury affirming the person meets the qualifying criteria for their category.
It takes effect when the business’s workers’ comp carrier receives and accepts it. The insurer may backdate acceptance by up to 15 days with the signer’s consent.
Once accepted, the waiver stays in effect indefinitely until the individual submits a written withdrawal to the insurer.
The insurer, agent, or broker has no duty to verify the statements in the waiver. There is a conclusive presumption that a person who signs a proper waiver is not covered.

That conclusive presumption deserves attention. Once you sign a valid waiver, you cannot later claim workers’ comp benefits even if the facts you stated turn out to be wrong.² Sign a waiver stating you own 10% of the stock when you actually own 8%, and the insurer is off the hook. You aren’t.

What Happens If the Waiver No Longer Qualifies

California requires every employer to carry workers’ compensation insurance for its employees. Failing to do so is a misdemeanor punishable by a fine of up to $10,000, up to one year in county jail, or both.⁵

SB 189 raises the practical stakes because it expanded who counts as an employee and tightened who can waive. Two situations create exposure. A business that doesn’t update its policy to include revocable trust holders now classified as employees is uninsured for those people. And a business relying on an old waiver from an officer who no longer qualifies — because the ownership percentage doesn’t reach 10%, or because the person has no health insurance — is in the same position.

Beyond the criminal penalty, an uninsured employer faces civil liability for the full cost of a workplace injury, without the damage limits that come with the workers’ comp system. The state can also issue stop orders that halt business operations until insurance is in place.

What SB 189 Does Not Cover

SB 189 is sometimes confused with other California laws. It is not the gig worker reclassification bill; that was AB 5 in 2019, which codified the ABC test for independent contractor status. It also has nothing to do with corporate climate or emissions disclosure, which comes from SB 253 and SB 261, both passed in 2023 and aimed at companies with annual revenues over $1 billion and $500 million, respectively.⁶ SB 189 is narrower: workers’ comp definitions and waivers for owners and executives.

What to Check in Your Own Situation

If you previously waived coverage, confirm your waiver still holds under the current rules. For officers and directors, that means verifying the 10% ownership threshold (or the 1% family-connection alternative) and confirming you carry qualifying health insurance. For professional corporation owners, confirm the health insurance piece and that copies are on file where they need to be. For cooperative officers, add the comparable disability policy to the checklist.

If anyone in the business holds their interest through a revocable trust, treat that person as an employee for workers’ comp purposes unless they independently qualify for a waiver and have signed one. The waiver pathway for a trust holder runs through whichever role they also occupy — officer, director, partner, or managing member — and the same eligibility rules apply.

1
LegiScan. California SB189 2017-2018 Regular Session Chaptered
2
California Legislative Information. California Code LAB 3352 – Employee Exclusions
3
California Department of Insurance. Notice Regarding SB 189 Changes in Definitions of Employee and Exclusions
4
California Legislative Information. California Code LAB 3351 – Employee Definition
5
California Department of Industrial Relations. DWC FAQs for Employers
6
California Air Resources Board. California Corporate Greenhouse Gas and Climate Related Financial Risk Disclosure Programs