AB5 in California

Workers’ compensation is a critical safety net for both businesses and employees. It covers medical expenses, rehabilitation, and lost wages if an employee is injured on the job. For businesses, workers’ comp provides financial protection from costly lawsuits and liabilities related to workplace injuries.

In California, AB5 has redefined how businesses classify workers, particularly freelancers and independent contractors. This law uses the ABC test to assess whether a worker should be classified as an employee or an independent contractor. If workers meet the criteria for employee status under AB5, businesses must provide them with workers’ compensation. This adds a layer of responsibility, ensuring that all qualifying workers have access to essential benefits if they are injured at work.

For cannabis businesses, compliance with AB5 means that employees must be covered by workers’ compensation. Given the high-risk nature of the industry, this coverage is essential for protecting both the business and its workers. Failure to provide workers’ comp can result in significant financial liabilities and compliance penalties, posing serious risks to the business.

Beyond workers’ comp, AB5 affects other insurance needs for cannabis businesses, including liability, property, and product liability insurance. Proactively complying with AB5 demonstrates a commitment to legal and insurance responsibilities, strengthening business credibility and fostering reliable partnerships within the cannabis industry.

Meeting workers’ compensation laws and AB5 requirements goes beyond regulatory compliance—it’s about safeguarding your workforce and your business against preventable risks.

PM Insurance Services can help you set up your business with the right coverage and help with your audits.