Quite often businesses start off as a family enterprise. Relatives present a ready pool of helping hands that are accessible willing and trusted. They are also more disposed to accept a low compensation compared to strangers so start-ups usually take this path until they become more profitable. However applicable Labor Code provisions should still be complied with despite relaxed arrangements. Section 3700 states that employers are required by law to get California workmans comp insurance for all of their employees including family members. Failure to do so can result in substantial fines and a prohibition on the use of labor until the insurance obligations are met. There are a few exceptions namely partnerships and companies wherein only the partners and the corporate officer-shareholders are the sole employees.
Employers must give due compensation and benefits to every employee. The problem is that sometimes people do not consider family members as such due to the informal nature of their agreements. If a nephew helps in the shop for a few hours each day then the state considers him as an employee. With this recognition come certain rights like California workmans comp insurance coverage for work-related injuries. For corporations this is a must at every level. For sole proprietorships and partnerships immediate family members like children spouse and parents are exempted from the requirement.
Note that minors have additional protection under Section 1308 of the Labor Code. A 15-year old for instance can help in the business only after acquiring a work permit that is available at the school. This permit is necessary even if the employer is one of the parents. It will contain the number of hours for which the minor is allowed to perform labor. The maximum is at 3 hours per school day and 8 hours on a non-school day with the weekly total not exceeding 18 hours when school is in session. During school breaks a minor may work up to 8 hours a day and 40 hours a week. Their tasks must be limited to those that are considered as non-hazardous to their health and well-being.