A Guide to Workers’ Compensation Exemptions

Workers’ compensation exists to help cover employers and workers alike in the event of an on-site accident. If an employee is injured on the job, it ensures they’ll be covered and can get the help they need from the employer they were working for at the time of the event. Workers’ compensation also helps protect employers, because most places and situations require policies to be in effect for each employee. Having the policies in place helps employers avoid costly legal battles. 

However, it is possible for an employee and/or organization to be exempt from workers’ compensation requirements. For an employer, that means they don’t have to provide coverage, and for an employee, it means they aren’t eligible for coverage. Here’s what you should know about workers’ compensation exemptions.

Who Is Exempt from Workers’ Compensation Insurance?

While nearly every state has workers’ compensation requirements, not every organization and employee is mandated to abide by these requirements. In some cases, organizations or employees may be automatically exempt from workers’ compensation coverage. 

Business Owners & Sole Proprietors

If you are a business owner or sole proprietor, you are likely exempt from workers’ compensation insurance. Among workers’ comp exemptions, a sole proprietorship is one of the most common. Typically, the laws that govern workers’ compensation only apply to companies and corporations, not to independent business owners and sole proprietors. 

Just because the applicable governing body doesn’t require you to have workers’ compensation, it’s not unlawful for certain companies you contract with to require you to have it. In this case, while it might not be illegal for you to opt-out, it’s likely that not having workers’ compensation will limit your ability to be hired. You can usually purchase workers’ compensation coverage for a reasonable rate, so it’s worth looking into.

Certain Employees

There are also cases in which certain employees are exempt from coverage. This means if you hire an employee whose job characteristics exempt them from coverage, you aren’t legally required to include them on your workers’ compensation plan. Even if other employees in your organization do have to be covered, you aren’t legally required to name exempt employee classes on your policy. In addition, if an employee is covered by your workers’ compensation policy, there may be times when they are not legally able to file a claim.

You must cover an employee on your workers’ compensation plan if they meet the following eligibility criteria: 

• The person in question is an employee. 
• The employee sustained their injury or illness while on the job. 
• You as an employer are required to carry workers’ compensation.
• The employee must file their claim within the legally mandated time frame. 

There are times when a workers’ compensation claim is likely to be denied. In the realm of workers’ compensation, exempt employees or instances occur when one of the following scenarios exists. 

• There is no evidence of an injury or illness and/or a doctor cannot confirm the existence of said injury or illness.
• The injury or illness is related to a pre-existing condition.
• The employee was intoxicated or behaving irresponsibly at the time of the injury.
• The employee failed to file a workers’ compensation claim within the proper time frame. 
• No medical attention was required to address the injury or illness. 

These are also reasons why an employer might refuse to provide a workers’ compensation form, regardless of whether a workers’ comp exemption exists. If an employer is aware that it’s likely the claim will be denied, they know the employee’s behavior was contributory, or they feel the claim is invalid for other reasons, they may not cooperate. While it’s often a legal requirement for employers to carry workers’ compensation, it’s not a legal requirement for them to be cooperative in helping an employee file a claim. 

State Workers’ Comp Exemption Laws

Workers’ compensation laws are state-specific. As an employer, it’s your responsibility to look into the workers’ compensation laws for your state, determine who is exempt from workers’ compensation insurance, and follow all mandates and regulations. For example, in Alabama, you’re not required to carry workers’ compensation if you have four or fewer regular employees, whether they’re full-time or part-time. In Arkansas, however, you’re only exempt if you have two or fewer employees. In California, corporate leaders and executives are required to carry workers’ compensation for themselves. However, in Connecticut, while these individuals are automatically included in the workers’ compensation policy for their company, they do have the option to exempt themselves or opt-out. 

How to Be Exempt From Workers’ Compensation

Just because you are exempt from carrying workers’ compensation doesn’t mean you’re automatically relieved of responsibility. You have to file a workers’ compensation owner exemption form and be approved for said exemption to avoid legal liabilities. As indicated previously, each state has a different set of exemption qualifications. Similarly, the process by which you’ll apply for workers’ comp exemption varies by state. However, this is a general list of the items you’ll need and steps you’ll follow to obtain workers’ compensation exemption. 

• Screening: In some states, the process of filing for workers’ compensation exemption will begin with a screening. Representatives from the state will come in to evaluate your business and determine whether or not you can apply for workers’ comp exemption. 

• Notice of Election: The next step is usually some version of a notice of election to be exempt from workers’ comp. This isn’t typically the official filing, it’s just a way to let your local workers’ compensation office know that you intend to do so. 

• Gather the Necessary Information: Now you need to compile all of the information required to file for an exemption. Usually, this includes things like employee information, details about the kind of business you run, your current business license, contact information for your workers’ compensation insurance company, and proof that you own the business in question. Depending on your state, you might need additional information. 
• Filing: After you go through the steps above (or the appropriate steps outlined by your state laws), you’ll officially file for an exemption. Most states have a single form you’ll have to fill out and submit to your workers’ compensation office. You may be requested to provide additional paperwork or information at the time of filing, so be sure to verify what you need before submitting everything. 

Work With An Experienced Local Lawyer

Hire an experienced workers’ compensation attorney as soon as the insurer or your employer shows signs of making your recovery difficult. If your injury involves an occupational illness or a cumulative injury, you may also benefit from a knowledgeable lawyer. An attorney will fight on your behalf for your rights to benefits as well as for the maximum amount of compensation. Retain the help you need at this difficult time in your life.

Submit a request online or call us today at (866) 345-6784 to get in touch with an attorney in your area!