If you run a California startup or small business, chances are your team doesn’t sit in one office anymore. You might have a sales rep in Nevada, a technician who drives into Oregon for service calls, or remote developers based in Texas. That’s awesome for growth—but it creates a maze of rules. This guide explains how to handle multi-state insurance compliance for mobile workforce while keeping costs under control, using clear language and California-specific pointers.
Why California Businesses Should Care
California has strong worker protections and strict rules about who counts as an employee vs. an independent contractor. Under California’s ABC test, most workers are presumed to be employees unless you can meet all three parts of the test (A: control, B: work outside your usual course of business, C: independently established trade). Misclassifying people can trigger penalties, unpaid taxes, and back benefits.
California also requires workers’ compensation if you have one or more employees (some owner exceptions exist). This applies even if your employees sometimes work outside the state.
Finally, California updated time-off rules: since January 1, 2024, employers must generally provide at least 5 days/40 hours of paid sick leave—a big change from 3 days. If you operate in multiple states, you must meet each state’s minimums; for California workers, this new floor applies.
The Big Picture: How Multi-State Compliance Works
Think in layers:
- Who Is the Worker (Employee vs. Contractor)?
In California, the ABC test sets the default. If someone is an employee in CA, plan on providing employees’ benefits and protections. - Where Is the Work “Localized”?
For payroll taxes and unemployment insurance, states follow a common set of tests (localization, base of operations, direction/control, residence) to decide which state’s rules apply for each employee. California’s EDD publishes a simple explainer for these multistate employment rules. - Which Insurance Applies in Which State?
Workers’ comp is state-by-state. Some states recognize other states’ policies for temporary work; others require you to list them on your policy or even buy coverage from the state fund (see monopolistic states below).
Workers’ Compensation: Your #1 Compliance Anchor
California Requirements (Baseline)
If you’re a California employer with employees, you must carry workers’ comp (or be approved as self-insured). This is non-negotiable.
Employees Working Outside California
If your California employee is hurt while working temporarily in another state, California law can still allow a claim here. But the safest approach is to set up your policy correctly for out-of-state work. Use an “Other States” endorsement and list any states where your people travel or work. If a worker starts working regularly in another state, you may need a separate policy in that state.
PRO TIP: Ask your broker to review travel patterns quarterly. A short project in Arizona may be “temporary,” but a 6-month placement might not be.
Monopolistic States (Special Case)
Four states require you to buy workers’ comp directly from the state fund: Ohio, North Dakota, Washington, and Wyoming. In these states, standard employers’ liability coverage (Part 2) is not included with the state policy. Many companies add stop-gap employers’ liability under their general liability program to fill that gap.
When Out-Of-State Workers Come Into California
California has extraterritorial rules too. If an employee is hired elsewhere and is temporarily in California, they may be exempt from California workers’ comp if the home state covers them here and recognizes similar reciprocity with California. Otherwise, your company may need California coverage.
Other Coverages to Review for a Mobile Workforce
- General Liability (GL): Protects against third-party injury or property damage claims. Make sure your policy territory matches where your people operate. For monopolistic states, consider stop-gap as noted above.
- Commercial Auto: If employees drive across state lines—even in their own cars—ensure you carry Hired & Non-Owned Auto. Check each state’s financial responsibility laws; for regulated carriers, federal filings may apply.
- Cyber: Remote work increases phishing and data-breach risk. Cyber insurance plus MFA/endpoint controls can be cheaper than one breach.
- Employment Practices Liability (EPLI): Multi-state teams mean multiple leave laws and wage-hour rules. EPLI helps with defense costs for claims like wrongful termination or discrimination.
- Health Benefits: Confirm your health plan network works for out-of-state employees; many small-group plans have limited networks. Consider nationwide PPO options if your team is spread out.
California Leave and Income-Replacement Programs that Affect Planning
- Paid Sick Leave: Minimum 5 days/40 hours a year as of 2024. Update your handbook and your payroll system.
- State Disability Insurance (SDI) & Paid Family Leave (PFL): Funded through CA payroll deductions; benefits increased in 2025, with many workers eligible for up to 90% wage replacement, subject to caps. Average weekly PFL benefits in 2025 are reported around ~$1,094; maximum weekly benefits are rising over time. Budget for employee deductions and HR workflow when workers take leave.
Payroll Tax and Registration Basics for Out-Of-State Staff
If your California business has an employee working in another state, you’ll usually need to register in that state, withhold that state’s income tax (if any), and pay that state’s unemployment insurance. That’s because the work is “localized” there or other tests point to that state’s jurisdiction. (Check each state’s revenue and labor sites; a multi-state payroll provider can help.)
Real-World Examples
- The Traveling Installer (CA ↔ NV):
A San Diego solar company sends installers to Nevada for 2-week projects. Their California workers’ comp includes Other States coverage listing NV. Trips are temporary, so one policy works. They track days on the road; if projects extend, they’re ready to add a Nevada policy. - New Hire In Washington (Monopolistic State):
A Los Angeles SaaS startup hires a remote support rep in Washington. The company buys workers’ comp from Washington’s state fund and adds stop-gap liability to its GL because the state fund does not include employers’ liability. - Independent Contractor Risk Check (California):
A delivery marketplace labels drivers as contractors. Under CA’s ABC test, that likely fails part B (drivers are central to the business), so they convert drivers to employees, budget for workers’ comp and paid sick leave, and cut misclassification risk.
Cost-Control Playbook (Without Cutting Corners)
- Map Your Footprint: List where employees live, where they work, and how often they cross state lines. Use this to set up the right workers’ comp and payroll registrations.
- Right-Size Class Codes: In California, correct workers’ comp classification and accurate payroll audits prevent overpaying. Ask your broker to review your WCIRB classifications annually.
- Use Safety + Return-To-Work Programs: Fewer injuries = lower experience mods over time in CA’s rating system. Even light-duty options can make a big premium difference at renewal.
- Watch Monopolistic States: Build the cost of state-fund premiums and stop-gap into your hiring budget before you make an offer.
- Refresh Leave Policies: Update handbooks to reflect 5 days/40 hours paid sick leave in California and 2025 SDI/PFL changes; plan coverage for absences to avoid overtime spikes.
- Bundle And Shop Smart: Work with a broker who handles multi-state placements. Sometimes packaging WC, GL, auto, cyber, and EPLI with the right carriers lowers total cost more than chasing a single line discount.
A Simple 6-Step Checklist
- Confirm Worker Status With The ABC Test (fix any misclassification).
- List Every State your employees live or regularly work in; mark temporary vs. regular work.
- Update Your Workers’ Comp: Add Other States coverage; secure state-fund policies and stop-gap where required.
- Register For Payroll/Unemployment in states that apply.
- Align Leave/Benefits: CA paid sick leave minimums and SDI/PFL updates; check multi-state health plan networks.
- Train Managers: Travel logs, injury reporting, and local labor rules reduce surprise costs and claims.
The Bottom Line
For California companies, how to handle multi-state insurance compliance for mobile workforce comes down to getting the foundation right (classification, workers’ comp, payroll registrations) and then tuning the details (leave rules, GL/auto/cyber/EPLI, and safety). With a clear map of where people work and the right endorsements or state-fund policies, you can protect your team, satisfy regulators in every state, and manage premiums—not chase them.