In the state of California, every employee (not a family member) working for a contractor must be covered by Workers Compensation insurance. Not having proper Workers Compensation insurance in accordance with California Business and Professions Code Section 7125 et seq. can lead to serious ramifications for contractors, including having to pay back any compensation provided to them on any given project, no matter where the project is at in the construction phase. California Business and Professions Code Section 7031 et seq. Workers Compensation insurance is serious business in California and contractors must abide by the laws to avoid significant legal issues and potentially lose their license. To defraud the state of California by failing to pay insurance for employees or under report the type of work or amount of work being conducted has equal penalties for contractors. Importantly, consumers are the ultimate losers as insurance claims against uninsured or underinsured contractors end up being distributed to California citizens.