Does Your Small Business Need Workers’ Compensation Insurance?

by Veronica Baxter

Perhaps. Statutory workers’ compensation laws are particular to each state, but in general, businesses having employees that are not large enough to self-insure must carry workers’ comp insurance. The number and type of employees triggering the workers’ compensation insurance requirement varies, and each state has different exceptions to that requirement.

The Number of Employees You Have Matters.

In most states, if you have just one employee you must carry workers’ compensation insurance. These include Alaska, Arizona, California, Colorado, Connecticut, Delaware, District of Columbia, Florida (for construction businesses), Hawaii, Idaho, Illinois, Indiana, Iowa, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Missouri (if a construction business), Montana, Nebraska, Nevada, New Hampshire, New Jersey, New York, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, South Dakota, Tennessee (if construction, coal mining, or trades), Utah, Vermont, Washington, West Virginia, Wyoming,

In Virginia, if an employer has two (2) or more employees it is required to carry workers’ compensation insurance.

In a handful of states, if you have three (3) or more employees you must carry workers’ compensation insurance. These include Arkansas, Georgia, New Mexico, North Carolina, and Wisconsin.

In Rhode Island and South Carolina, if you have four (4) or more employees you must carry workers’ compensation insurance.

In a handful of states, if you have five (5) or more employees you must carry workers’ compensation insurance. These include Alabama, Mississippi, Missouri (all businesses except construction), Tennessee (if not construction, coal mining, or trades), West Virginia (if agriculture),

In Florida, if you have an agricultural business and have six (6) or more employees and twelve (12) or more seasonal employees, you must carry workers’ compensation insurance.

In Texas, workers’ compensation insurance is optional unless the business is a construction company on contract for the government.

The Size of Your Business Might Matter.

In Kansas, workers comp insurance is required for all businesses with employees and with gross payroll over $20,000 a year.

The Type of Employees You Have Might Matter.

Most states provide an exception for household and domestic employees, such as Alabama, Arizona, Colorado (when part-time), D.C (when working less than 240 during a calendar quarter), Hawaii (when earning less than $225 per quarter), Idaho, Iowa (if making less than $1500/year), Kentucky, Maine, Mississippi (if less than five workers), Missouri, Montana, Nebraska, Nevada, New Mexico, Oklahoma, Pennsylvania, Rhode Island, South Dakota (if working less than 20 hrs/week and less than 6 weeks in any 13-week period), Utah, Washington (unless there are two or more employees at 40 hrs/week or more),

Most states provide an exception for farm laborers and harvest or transient help, such as Alabama, Alaska, Arizona, Arkansas, Delaware, Illinois (if less than 400 days of labor a year), Iowa (if farm pays less than $2500/year), Kansas (if gross payroll under $20K), Kentucky, Maine, Maryland (if less than 3 FT employees or less than $15K annual payroll), Mississippi (if less than five workers), Missouri, Nebraska, Nevada, New Mexico, North Carolina (if less than ten workers), Oklahoma, Pennsylvania, Rhode Island, South Carolina, South Dakota, Utah, Vermont (if annual payroll is less than $10K), Washington (if minors working on the family farm),

Some states exempt real estate agents and other brokers paid by commission from workers’ compensation.  These include Arkansas, Colorado, Hawaii, Idaho, Louisiana, Massachusetts, Missouri, Montana, New Mexico, Oklahoma, Pennsylvania, Rhode Island, South Carolina, Utah.

Alaska provides an exception for commercial fishermen.

Large National Businesses May Self-Insure.

Most states allow large businesses to self-insure except North Dakota and Ohio, which require businesses to purchase workers comp insurance from a state-administered fund.

Inquire as to the Specific Requirements Where You Do Business.

Every state has a specific definition of “employee” for the purposes of workers’ comp. Many states include part-time workers, and several states include family members, minors, and illegal aliens as employees. Every state also specifies whether sole proprietors, single member LLCs, partners, and family farms are considered employees and may opt-out or into workers’ comp.

The bottom line is, look carefully at your state’s workers’ comp requirements and if doing business in more than one state, look at every state’s requirements.

 

Veronica Baxter is a blogger and legal assistant living and working in the great city of Philadelphia. She frequently works with Larry Pitt, Esq., a busy Philadelphia workers’ compensation lawyer.

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