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What Is a Workers’ Comp Exemption?
Most states require businesses with employees to carry workers’ compensation insurance. But you may be able to apply for a workers’ comp exemption for certain types of workers, like independent contractors. This means you don’t have to provide workers’ comp to cover that worker if they get hurt or sick from their job.
While getting a workers’ compensation exemption can help you save on insurance costs, there are risks.
For example, let’s say you’re a sole proprietor and your state exempts you from carrying workers’ comp. While working one day, you trip and fall in your office. Your health insurance policy won’t cover your medical bills because your injury happened at work. And because you don’t have workers’ comp insurance, you won’t get benefits to help you recover. So, you’ll have to pay for your treatment costs out of pocket, which can get expensive quickly.
Who Is Exempt From Workers’ Compensation Insurance?
In most cases, your employees can get workers’ compensation insurance benefits if they get hurt or sick from their job. But some states may exempt certain jobs from coverage.
For example, not all states require workers’ compensation for self-employed and independent contractors. An exemption from workers’ comp may also apply to:
- Volunteers
- Government workers
- Shop owners
- Railroad employees
- Farm workers
- Maritime workers
Some states may also exclude employees from getting workers’ compensation benefits if:
- They have mental health issues not caused by their work
- Their injuries are from a fight, from a policy violation or self-inflicted
- They got hurt while they were away from work
Workers’ Comp Exemption Forms and Processes
How Do You Get Workers’ Comp Exempt?
To get an exemption for workers’ compensation coverage, your business must go through your state’s screening process. You may have to apply for or renew your exemption by filing a “Notice of Election to be Exempt From Workers’ Compensation” with your local workers’ comp office. Be aware that there may be a processing fee for filing this exemption form.
To become an exemption applicant, you’ll need to provide:
- Employee information
- Details on the type of business you own
- Up-to-date business license
- Proof of ownership
- Contact information for your workers’ compensation insurance carrier
If your state approves your application, you’ll get a certificate of election to be exempt from workers’ compensation.
State Workers’ Compensation Exemption Requirements
Just like each state has its own workers’ compensation laws, there are also unique workers’ comp exemption rules. For example:
Business owners without employees may be wondering, “Do I need workers’ comp insurance?” Generally, the answer is no. If a business owner doesn’t have any employees, they’re a sole proprietor. So, it’s likely that state law won’t require them to buy workers’ comp. But this does carry a risk. If the business owner gets a work-related injury or illness, they’ll have to pay out of pocket for medical bills.
Workers’ compensation laws can make getting coverage feel intimidating. Don’t let it stop you. Instead, reach out to us. If you have questions about workers’ comp exemptions, what workers’ compensation is o la types of workers’ compensation benefits, we’ve got your back.
4 California Legislative Information, “Workers’ Compensation and Insurance: Employees”
- Florida workers’ compensation exemptions differ for construction or non-construction businesses. The Division of Workers’ Compensation also has different rules for corporations and limited liability companies (LLCs) to be eligible for exemption.1
- Massachusetts workers’ compensation law allows corporate officers to file for an exemption if they own at least 25% of the company.2
- New York workers’ compensation law only allows businesses without employees, or out-of-state businesses obtaining a contract for work done outside of the state to file for an exemption.3contract for work done outside of the state to file for an exemption.3
- New Jersey workers’ compensation law exempts unpaid interns, unpaid volunteers, independent contractors and sole proprietors with no employees from its workers’ comp law.
- California workers’ compensation exemption laws apply to different types of business owners, such as corporate officers, directors and members of a LLC if they aren’t employees of the business.4
Because exemption laws vary between states, it’s important to make sure you know what types of businesses are exempt in your state.
Common Questions About Workers’ Compensation Exemptions
Do Business Owners Without Employees Need To Buy Workers Comp?
Business owners without employees may be wondering, “Do I need workers’ comp insurance?” Generally, the answer is no. If a business owner doesn’t have any employees, they’re a sole proprietor. So, it’s likely that state law won’t require them to buy workers’ comp. But this does carry a risk. If the business owner gets a work-related injury or illness, they’ll have to pay out of pocket for medical bills.
Be aware that business owners who also hire temporary employees or contract out work may need workers’ comp. That’s because these kinds of workers can still face a risk of work-related injury or illness and the business owner could be liable.
Do Members of an LLC Need Workers’ Comp?
Members of an LLC may need workers’ comp if the state they’re in requires it. Even if your state doesn’t require limited liability company members or an officer of a corporation to have workers’ comp insurance, it’s still a good idea to have. It can help them recover from work-related injuries or illnesses.
What Does Workers’ Comp Exempt Mean?
Being workers’ comp exempt means an employee doesn’t have coverage for workers’ compensation insurance. If a worker has an exemption, they won’t get benefits to help them recover from a work-related injury or illness. So, they or their employer will have to pay out of pocket for:
- Medical bills
- Ongoing care costs
- Treatment expenses
The exempt employee also won’t receive lost wage replacements if they miss work because of an injury or illness caused by their job.
Additional Information About Workers’ Comp Exemptions
Workers’ compensation laws can make getting coverage feel intimidating. Don’t let it stop you. Instead, reach out to us. If you have questions about workers’ comp exemptions, what workers’ compensation is o la types of workers’ compensation benefits, we’ve got your back.
Not all workers’ compensation insurers are the same. We take the hassle out of workers’ compensation insurance so you can focus on running your business. Get a workers’ compensation insurance quote today and learn how we can help protect you and your employees.
1 Florida Division of Workers’ Compensation, “Exemptions”
2 Massachusetts Department of Industrial Accidents, “Workers’ Compensation Insurance Requirements”
3 New York Workers’ Compensation Board, “Request for WC / DB Exemption (Form CE-200)”