Workers’ Comp Exemption: Explore Your Options

Q: What Does a Workers’ Comp Exemption Do?

A workers’ compensation exemption, or “WC exemption,” means you don’t have to provide workers’ comp to help cover a worker’s job-related illness or injuries. While getting a workmans’ comp exemption can help you save on insurance costs, there are risks.

Q: Do I Need Workers’ Compensation if I Don’t Have Employees?

If you’re a business owner without employees, you’re a sole proprietor, so it’s unlikely that state law would require you to buy workers’ comp. But this does carry a risk. If you have a work-related injury or illness, you may have to pay out of pocket for medical bills.

Key Takeaways

A workers’ comp exemption means that certain business owners and workers might not be required to have workers’ compensation insurance, depending on your state law, job type and industry.

While an exemption can help reduce insurance costs, it also means you may have to pay out of your own pocket for medical bills and lost income if a work-related injury or illness occurs.

Workers’ comp exemption rules and application requirements vary by state, so it’s important to confirm whether your business qualifies before opting out of coverage.

What Does a Workers’ Comp Exemption Do?

A workers’ compensation exemption means you don’t have to provide workers’ comp to help cover an employee’s job-related illness or injury. While getting a workers’ comp exemption can help you save on insurance costs, there are risks you should be aware of.

For example, if you’re a sole proprietor in a state that exempts you from workers’ compensation coverage and you’re injured at work, you may have to pay for the medical costs yourself. Health insurance often won’t pay for work-related injuries, and without workers’ comp benefits, medical bills can add up quickly.

Who Is Exempt From Workers’ Compensation Insurance?

In most cases, employees can get workers’ compensation insurance benefits if they get hurt or sick from their job. But some states may exempt jobs from coverage based on certain circumstances.

For example, not all states require workers’ compensation for self-employed and independent contractors. An exemption from workers’ comp may also apply to the following types of workers:

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, policy violation or self-inflicted
They got hurt while they were away from work

Workers’ Comp Exemption Forms and Processes

Getting a workers’ compensation exemption requires business owners to apply through their state’s screening process. Each state has its own rules for exemptions, but the application process is often similar. Here’s what you need to know to get started.

How To Get a Workers’ Comp Exemption

To qualify for a workers’ compensation exemption, you may have to complete and file a “Notice of Election To Be Exempt From Workers’ Compensation” with your local workers’ comp office. There may be a processing fee for filing this exemption form.

To apply for an exemption, you’ll need to provide:

Employee information
Details on the type of business you own
An 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 workers’ comp exemption certificate. You may need to apply for a workers’ comp exemption renewal annually or less frequently, depending on where your business is located.

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:

Florida workers’ compensation exemptions differ for construction or non-construction businesses. Florida’s 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 or directors who own at least 25% of the company to file for an exemption, as long as all officers or directors who meet that ownership threshold are listed and sign the exemption form.^2,3
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.⁴
New Jersey workers’ compensation law automatically exempts unpaid interns, unpaid volunteers, independent contractors and sole proprietors with no employees from its workers’ comp program. But corporations, partnerships/LLCs and sole proprietorships must always maintain workers’ comp coverage or be approved for self-insurance.⁵
California workers’ compensation exemption laws allow certain types of business owners, such as qualifying corporate officers, directors, general partners and members of an LLC to elect exclusion from coverage if they meet statutory requirements and submit a waiver.^6,7

Because exemption laws vary between states, it’s important to make sure you know which types of businesses in your state are exempt from needing workers’ compensation insurance coverage.

Do I Need Workers’ Compensation if I Don’t Have Employees?

If you don’t have any employees, state law typically doesn’t require you to carry workers’ compensation coverage. But without coverage, you’ll likely have to pay out of pocket if you’re injured or become ill due to your job duties.

You may still need workers’ comp if you hire temporary workers or contractors because work-related injuries could leave you financially responsible.

Find out if you need workers’ comp for your business.

Additional Information About Workers’ Comp Exemptions

Workers’ compensation laws can make getting coverage feel intimidating, but don’t let it stop you from being compliant. Our team is here to help you get the coverage you need to protect your business. If you have questions about workers’ comp exemptions, what workers’ compensation is or the types of workers’ compensation benefits, give us a call at 855-829-1683.

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.

Frequently Asked Questions About Workers’ Comp Exemptions

Do Members of an LLC Need Workers’ Comp?

The LLC structure itself does not automatically exempt a business from workers’ comp requirements. Members of an LLC may need workers’ comp if the state they’re in requires it. Even if your state doesn’t require LLC members or corporate officers to have workers’ comp insurance, it’s still a good idea to carry this coverage. It can help provide benefits while they recover from a work-related injury or illness.

What Does Workers’ Comp Exempt Mean?

Being workers’ comp exempt means an employee isn’t covered by workers’ compensation insurance. Exempt workers won’t get benefits to help them recover from a work-related injury or illness, so they or their employers will have to pay out of pocket for:

Medical bills
Ongoing care costs
Treatment expenses

An exempt employee also won’t receive lost wage replacements if they miss work due to an injury or illness caused by their job.

How Do I Pay for Workers’ Comp Coverage?

You can pay for workers’ comp coverage either based on your estimated payroll or actual payroll. With traditional billing, your premium is calculated upfront using an estimate that could lead to overpaying and adjustments at audit time.** With pay-as-you-go billing, your premium is based on what you actually pay your employees. The Hartford offers pay-as-you-go workers’ comp, so you pay for coverage based on your actual payroll, not an estimate. This option gives you a more accurate bill.

Does Maine Require Workers’ Compensation Insurance?

Yes, almost all employers are required to have workers’ compensation insurance in Maine.⁸ If you have any full-time or part-time employees, you’ll likely need to have workers’ comp coverage to help protect them on the job. However, some professions are not required to have this coverage, so be sure to check with your local laws to find out if you’re exempt.