The "stop order" was issued after a worker reported Tuesday that a co-worker who had been injured did not have the state-required health coverage, said Dean Fryer, spokesman for the California Department of Industrial Relations.
Regulators determined coverage for 69 employees at the Santa Barbara County ranch lapsed Jan. 10, Fryer said.
"In effect, it shuts them down," Fryer said.
Jackson and his immediate family may still live at Neverland, however, and he could keep the ranch running by hiring an outside company whose employees are covered by workers compensation, Fryer said.
A call to Jackson's spokeswoman seeking comment was not immediately returned.
Jackson, 47, has lived in the Persian Gulf nation of Bahrain since being acquitted of child molestation charges last year. A call to his spokeswoman seeking comment was not immediately returned Thursday.
The 2,600-acre ranch boasts amusement park rides and has been home to elephants, giraffes, snakes, orangutans, tigers and a crocodile. Fryer said local animal welfare agencies were notified of the shutdown so they could make arrangements to feed and care for the animals.
The ranch operators have five days to appeal the order and fine, Fryer said. If workers violate the order by returning to the ranch, the department can seek criminal charges or file a lawsuit.
The shutdown was prompted by the latest in a slew of complaints against the ranch by workers, 47 of whom have complained this year that they haven't been paid, Fryer said.
On Tuesday, the department sent a letter to an accounting firm that handles Jackson's business, demanding payment of $306,000 in wages, and an investigation into the complaints is continuing, Fryer said.
A call to a Los Angeles office of the accounting firm Bernstein, Fox, Whitman, Goldman & Sloan LLP was not immediately returned Thursday.
Fryer noted that the department has not heard directly from the worker who was said to be injured, but the report was enough to get the investigation moving. The department hopes to hear from that worker, he said.