The Most Pressing Workers' Compensation Insurance Exemption Questions You've Been Dying To Ask

Workers' comp insurance protects both employers and employees in case an accident happens at the office or on a worksite. When work-related injuries occur, the insurance company helps cover injured workers' medical bills, lost wages, and legal expenses. 

On the flip side, workers' comp prevents employees from suing you, the employer, if they get hurt on the job. 

Companies in all industries and of various sizes are required to have workers' comp insurance. However, there are exceptions to the rules. Your company could qualify for a workers' compensation exemption.

Here's what you'll learn about workers' comp exemptions:

• What a workers' compensation exemption is
• Who is exempt from paying workers' comp insurance
• California's workers' comp exemption rules
• How to get a workers' compensation exemption

What Is A Workers' Comp Exemption? 

A workers' comp exemption means you don't have to provide workers' compensation insurance or benefits to yourself or your employees. Each state has regulations that determine who needs to invest in workers' comp insurance and who doesn't. There are several reasons why you might be exempt from paying for workers' comp.

Who Is Exempt From Workers' Compensation Insurance?

Because states set their own workers' compensation laws, they also set their own rules about exemptions. 

Here are some trends found in states' workers' comp exemptions laws:

• If your company has only a few employees, usually five or less, then you don't need to get workers' compensation insurance in most states. For example, in Florida, you are exempt from providing workers' comp insurance if you don't work in the construction industry and have three or fewer employees.
• Sole proprietors, corporate officers, and LLC (limited liability company) members can opt-out of carrying workers' comp insurance in many states, such as Colorado and Indiana.
• Independent contractors usually don't count as employees and therefore don't need to be covered by workers' compensation insurance in states like Mississippi and Rhode Island.

Check your local laws for specific regulations on who is and is not legally required to have workers' compensation insurance coverage.

What Are California’s Rules For Workers' Comp Exemptions?

In California, the general rule for workers’ comp is that all companies' employees must be covered in all industries. 

However, small business owners are typically exempt if they're:

• Sole proprietors who have no employees other than themselves
• Officers of corporations with full ownership of their companies

The California State License Board, which regulates the state's construction industry, makes all companies show proof of workers' compensation insurance coverage with a certificate. 

If a company has no employees and would prefer not to pay for workers' compensation insurance, they must apply for a certificate of election to be exempt.

How Do You Get A Workers' Comp Exemption?

To get a workers' comp exemption in most states, you must fill out a form online or mail it in. Some states have separate forms for companies in the construction industry and those that are not. 

You can typically find these forms on the website of your state's labor agency or financial services department.

For example, in California, you can fill out an exemption form through the California State License Board's website.

Final Thoughts: Workers' Comp Exemption FAQs

In many states, all companies have to provide their employees and businesses with workers' comp insurance coverage. However, there are exceptions for small businesses, sole proprietorships, independent contractors, LLCs, and single-employee corporations. 

Check your state's laws to see if you qualify for a workers' comp exemption. 

If you don't qualify for an exemption, learn how Hourly can help you get your workers' compensation insurance on autopilot.