If we are a small business and an employee has been out on worker’s comp for over 4 months and is now waiting for surgery, how long do you have to leave his position open?

In California, the Fair Employment and Housing Act also requires employers to provide a reasonable accommodation to employees with a disability. One form of reasonable accommodation can be allowing someone to return to work after time off for their condition, even if they need more time than FMLA provides.

But the length of time has to be "reasonable," and what is reasonable varies from case to case. You don't have to hold the position forever. You should ask for certification from their doctor that they believe the employee will be able to return relatively soon. Furthermore, in your case, you might argue that it is an "undue hardship" and therefore not reasonable for a small business to hold more than one position open at the same time. 

If your business is large enough to be subject to FMLA (at least 50 employees) or a similar state law, AND the employee qualifies for FMLA leave (e.g. has worked for at least one year; has worked at least 1,250 hours in the past 12 months), then you neeed to hold his/her position for up to 3 months (the length of FMLA leave), plus for however long the employee has PTO (i.e. sick and vacation) days to cover. That's it; there is otherwise no obligation to hold a job for an employee who cannot work due to injury or illness--even when an employee has Worker's Compensation--unless you agreed to do so.