When businesses take on employees they are required to have workers compensation. In Cali, it does not matter if you have 1 employee or 1 million, you need coverage.
Workers comp covers the liability risks if an individual is injured while on the job. Instead of an employee suing you for the injuries, instead they can rest assured knowing they will have the medical payments they need taken care of.
Keep in mind though that each state has their own laws regarding workers comp.