Depending on your state, certain types of employees can qualify for a workers’ compensation exemption.
Nearly every state requires businesses with employees to carry workers’ compensation insurance. But there are some types of businesses and employee categories that qualify for a workers’ compensation exemption.
Workers’ compensation laws help ensure employees can get the care they need if an accident happens on the job. They also can protect employers from being sued by those same employees for further damages.
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Every state has its different rules when it comes to who qualifies for a workers’ compensation exemption. In general, these exemptions relate to the type or number of employees a business has on its books.
Many states offer a workers’ comp exemption to businesses with only a few employees. For example:
Certain employee types can also be exempt, but it’s important to check with your insurance company and state laws to see if they qualify. For example, in some states, if you hire an independent contractor, they could be considered an employee:
Additionally, depending on how your business is structured, if you hold one of the following titles, you could qualify for a workers’ comp exemption:
Keep in mind that while this may seem like a long list, it’s extremely specific and varies from state to state.
Most states require business owners to have a workers’ compensation policy. These exemptions are exceptions, special circumstances when the normal rules don’t apply.
Depending on your state, if you have a certain number of employees, you need to provide workers’ comp insurance to protect them from financial losses after a work-related injury.
If you want to get a workers’ compensation exemption, it’s important to contact your state department of labor and insurance company to see if your business qualifies.
For example, in Vermont, all employers with one or more employees — whether full- or part-time — must carry workers’ comp coverage. However, the state provides an exemption for up to 4 members of an LLC.
So if you own an LLC in Vermont that has employees, you’ll have to provide them with workers comp, but if you want to legally avoid having to purchase workers’ comp for yourself, you can request an exemption.
The process includes filling out an exemption form and submitting notarized documents. Much like exemption laws themselves, the process of getting an exemption, and the fees associated with it, vary from state to state.
While there may be times when you can get an exemption, having workers’ compensation insurance coverage can still provide important benefits.
For example, as a sole proprietor, you might not be required to have coverage. But if you get hurt on the job, there’s no one else to keep your business running. Workers’ compensation benefits can help pay for lost wages and medical bills that your personal health insurance might not cover.
Additionally, by offering workers comp, even if you have a small team that doesn’t cross your state’s requirement threshold, you can provide an extra incentive when trying to recruit top talent and show your employees how important they are by taking care of them should anything happen.
Finally, businesses like to work with other businesses that are fully insured.
For example, general liability isn’t a legal requirement in most states, but many businesses will only work with those who have coverage.
Similarly, even if you aren’t required to have a workers’ comp policy, you’ll probably find clients, partners and subcontractors will be more likely to work with you if you can show your employees are covered.
We make it easy to find the workers’ compensation your business needs with our fast, affordable and tailored business insurance options.
You can start a quote online, customize your options and access your certificate of insurance online in about 10 minutes.
Matt Crawford leads NEXT's content team. He's a small business insurance specialist and has worked with business owners throughout his career as a community journalist and content marketer.
You can find him at one of his many favorite local restaurants in the San Francisco Bay Area when he's not at work.
