Workers Compensation Laws by State

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Workers Compensation State Laws

As a small business owner, you’ve probably figured out there is a long list of insurance options available to protect your assets. The list can be overwhelming -- commercial property, general liability, commercial auto, cyber liability, employment practices, and let’s not forget workers compensation insurance. For many businesses, workers compensation is difficult to embrace, especially if you have a small workforce that doesn’t spend their day involved in risky tasks.

3 Things You Need to Know about Workers Comp

  1. It’s required in most states. The majority of states require businesses to purchase workers compensation insurance. Some require workers comp for every business and some base the requirement on the number of employees. There are a select few states like Texas and Oklahoma that let the employer decide if they want to purchase coverage.
  2. Monopolistic states prohibit private workers comp insurers. There are currently four monopolistic states: Ohio, Wyoming, Washington, and North Dakota. These states do not allow private insurance companies to sell workers compensation insurance to businesses. Instead, businesses must purchase workers comp from the state fund or declare themselves self-insured.
  3. There are serious fines associated with noncompliance. Deciding to skip buying workers compensation insurance to save a few dollars is risky. Most states impose on noncompliant businesses a fine or penalty. The cost of the fine varies by state, the number of employees, the length of noncompliance time, and the reason you were without coverage.

Workers Compensation is a Benefit, Not an Expense

Small businesses often cringe at the idea of adding one more insurance policy to their portfolio because you have a minimal budget. Workers compensation insurance is not just a state requirement. It’s a benefit you offer to your employees and should be treated as such.

Businesses of all sizes should consider workers compensation insurance. It pays medical expenses and lost wages resulting from job-related illnesses or injuries. Before you decide not to buy it, consider this, what would happen if your star employee, your office manager or administrative assistant, slipped and fell in the lobby, breaking their wrist? Workers comp insurance would pay the medical costs, wages for time off, and keep you in the employees’ good graces. Otherwise, they may file a lawsuit to get the financial assistance they need – leaving you with a negative reputation.

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State-Specific Highlights

Every state has different requirement for workers compensation. Here’s a breakdown of some of the state-specific highlights and rare cases.

  • Arkansas requires all construction businesses to carry workers compensation even if they have no additional employees. This is a change from their three-employees-or-more requirement for other industries.

  • Florida requires non-construction industry employers with more than four employees to carry workers compensation. Construction employers are required to carry it when they have one employee, which includes the owner.

  • Maryland requires nearly every employer to carry workers compensation. There are two exceptions: agricultural businesses with fewer than three employees or less than $15,000 in payroll.

  • Montana has a long list of exceptions to their workers compensation requirement including officials, umpires at amateur sporting events, newspaper couriers, ministers, and athletes in contact sports.

  • Texas is known as a state that gives businesses a choice in purchasing workers compensation. There is one exception to the law -- construction companies with government contracts are required to carry workers comp insurance.