Who qualifies for a workers’ comp exemption?
Most states require business owners to carry workers’ compensation coverage for their employees. Workers’ comp exemptions are special circumstances when the normal rules don’t apply. And every state has its different rules for who qualifies for a workers’ compensation exemption.
Workers’ comp exemptions based on number of employees
Many states offer a workers’ comp exemption to businesses with only a few employees. For example:
- Arkansas exempts businesses with two or fewer employees.
- Mississippi gives exemptions for four or fewer employees.
- South Carolina exempts when you have three or fewer employees.
- Oklahoma gives exemptions for family businesses. Employers with five or fewer employees who are family members can be exempt.
Workers’ compensation exemptions based on industry
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.
It’s common in many states for some workers to be exempt from workers’ comp, including:
- Volunteers
- Domestic workers and household workers
- Independent contractors
- Agricultural workers
- Maritime workers
Workers comp exemptions based on business structure
Depending on how your business is structured, if you hold one of the following titles, you could qualify for a workers’ comp exemption:
- Sole proprietor or self-employed
- Partner
- Member of a limited liability company (LLCs)
- Executive officer or corporate officer who owns a percentage of company stock
How to request a workers’ comp exemption
If you want to get a workers’ compensation exemption, 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.
To request an exemption from a workers’ compensation insurance policy in your state, fill out an exemption application and submit notarized documents. Much like exemption laws themselves, the process of getting an exemption, and the fees associated with it, vary from state to state.
The benefits of Workers’ Compensation insurance (even if it’s not required)
Even if your business qualifies for an exemption, workers’ compensation insurance coverage can still provide important benefits to help protect your employees, yourself and your business investment.
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 will require a monthly premium, but the benefits could help pay for lost wages and medical bills. Chances are that your personal health insurance won’t provide this kind of coverage.
If you have a small team that doesn’t cross your state’s requirement threshold, offering workers’ comp as an extra incentive can help you recruit top talent and show your employees that you value their work.
In addition, other businesses often like to work with partners and subcontractors that are fully insured. The extra layer of protection and the professionalism it demonstrates could help create some meaningful business opportunities.
For example, general liability insurance isn’t a legal requirement in most states, but many businesses will only work with those who have coverage.
How NEXT helps protect small business owners
NEXT makes it fast, easy and affordable to protect your small business — and you can do it all online.
We’ll ask a few questions about your business and give you a quote. You can select your coverage options and buy your policy in about 10 minutes. Your certificate of insurance will be available immediately, and you can access your policy 24/7 via web or mobile app.
If you have questions, our licensed, U.S.-based insurance professionals are available to help.
Start a free quote with NEXT.
