What are Workers Compensation Insurance Requirements by States?

Thang Truong
Thang Truong
Updated on:

Workers compensation insurance is required by laws in most states, except Texas. It covers medical bills and wage loss for employees who are injured or become ill at work. It protects both employers and employees in bad time. Although it is required by most states, each state has slightly different regulations that companies should pay attention to.

What is Workers’ Compensation Insurance?

Workers’ Compensation is important for any business to have, large or small. It’s an insurance required by state law, and provides wages and medical costs for employees who are injured or become ill at work. It’s crucial for both owners and employees, since it protects owners from civil lawsuits filed by their employees, and allows employees to recoup lost wages and medical expenses from injuries or illness on the job. Workers’ Comp also pays death benefits in the unfortunate event that one of your employees is killed on the job, or dies from a work-related illness. 

>>MORE: What is Employers’ Liability Insurance? And Best Providers

What does Workers’ Compensation Cover?

Workers’ Comp protects you and your employees from any injury or illness that might happen during the course of a job. Usually, this includes at-fault accidents or injuries, except in the case of reckless horseplay or drug and alcohol use. Workers’ Compensation rules and benefits vary from state to state, so it’s important to know the laws for the area where you’re located. 

>>MORE: Top 5 Providers of Workers Comp Insurance for Independent Contractors

Workers’ Compensation Insurance – Differences among U.S. States

Workers’ Compensation insurance isn’t just reassuring to have; it’s required by state law. Texas is the only state where Workers’ Comp insurance is optional. Even so, you’ll probably still want to have it to protect yourself and your employees. If you’re in one of the other 49 states, you’ll likely need to purchase Workers’ compensation coverage as soon as you hire your first employee. Below are some examples of how Workers’ Comp laws vary from state to state, and why it’s so important to secure coverage for your business. 

Workers’ Compensation Insurance in California

In California, it’s a crime not to have Workers’ compensation insurance for your employees. You can be hit with up to a year in jail and $100,000 in fines–definitely not something you want. You could also get a stop order sent to your business. In California, if you employ even just one person, you’ll need Workers’ Comp insurance. 

>>MORE: Top 6 Providers of Workers Compensation Insurance in California

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Workers’ Compensation Insurance in New York

Again, it’s a crime in New York not to have Workers’ Comp insurance (along with every state except Texas). You could be charged with a felony, and fines up to $50,000, with an additional penalty of $2,000 for every 10 days without coverage. A business is also required to post a notice on its premises that its employees are covered under Workers’ comp. There are a few circumstances in New York where Workers’ Comp insurance is not necessary. You do not need to purchase Workers’ Comp insurance if:

  • The business is owned only by one person, with no other employees, subcontractors, volunteers, etc. 
  • If the business is a corporation or partnership with no employees.
  • If the business is owned by either one or two people who also own all stock and offices of the business. 

There are also occasions in New York where independent contractors do not need to be covered under Workers’ Comp. You should check with the contractor and make sure they are exempt from this coverage before starting work. 

>>MORE: Top 6 Providers of Workers Compensation Insurance in New York

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Workers’ Compensation Insurance in Texas

As mentioned above, Texas is the only state where Workers’ Compensation insurance is optional. Employers and business owners are not forced to participate in the Workers’ Comp program. However, if a business chooses not to have Workers’ Comp insurance, that opens them up to potential lawsuits and damages if an employee is injured on the job. Otherwise, the program in Texas works just like in other states, where injured employees can make claims for benefits, but cannot sue their employer. 

Workers’ Compensation Insurance in Colorado

In Colorado, any employer with at least one employee is mandated to have Workers’ Compensation, under penalty of law. This covers work-related injuries and illnesses, regardless of who is at fault. To get maximum benefits, anyone seeking to file a Workers’ Comp claim in Colorado should give written notice within four days of the work-related injury. Employers are obligated to report the injury within 10 days of its occurrence. In Colorado, independent contractors, casual maintenance or farm workers, and part-time domestic workers all may be exempt from needing Workers’ Comp coverage.

Workers’ Compensation Insurance in Florida

In the Sunshine State, any business with four or more employees is required by law to carry Workers’ Compensation insurance. Any construction company with at least one employee must have Workers’ Comp, and any farmers with five or more employees or 12 seasonal employees, must purchase coverage as well. In Florida, injured employees have 30 days to report the injury to their employer, with some exceptions. Note that in Florida, mental or psychological injuries are not covered under Workers’ Comp unless they are a result of a physical injury. Also important to note is that your company must authorize the doctor who treats you. The company also does not need to give you back your job once you are healthy again, so you should keep that in consideration. 

>>MORE: Top 6 Providers of Workers Compensation Insurance in Florida

Workers Compensation Insurance in Pennsylvania

Most businesses in Pennsylvania will require Workers’ Comp coverage for their employees. There are some exemptions, including railroad workers, longshoremen and federal employees, who are covered under other Workers’ comp programs. Also, domestic servants or agricultural workers who work fewer than 30 days a year or earn less than $1,200 in a calendar year from one employer are exempt, along with employees requesting religious exemption. Employers can receive Workers’ Compensation insurance either from an insurance carrier, or the Pennsylvania State Workers’ Insurance Fund. 

Any employees who are injured on the job in Pennsylvania are required to notify their employers within 21 days of the incident. Like Florida, a company is not required to hold your job open for you if you are injured and collected Workers’ Comp benefits. 

>>MORE: How to Find Cheap Workers Compensation Insurance?

Workers’ Compensation Insurance in Georgia

In Georgia, Workers’ Compensation insurance is obtained through the State Board of Workers’ Compensation (SBWC). This board is responsible for granting medical, rehabilitative, and income benefits in the event of a workplace injury. At-fault injuries to employers are still covered, though if the injury results from horseplay or alcohol or drug use, it may not be covered under Workers’ Comp. A business must post a list of six qualifying physicians or a Managed Care Organization, from which the injured employee may choose a medical provider. In Georgia, an injured employee may sometimes be eligible for partial benefits even after returning to work, for a period of up to 350 weeks. 

Workers’ Compensation Insurance for the Self-Employed

If you’re self-employed, or an independent contractor, you may be curious if you need Workers’ Compensation insurance. Although laws vary from state to state, self-employed or independent contractors are typically not required to purchase Workers’ Comp insurance. But self-employed and independent contractors may want to purchase a policy anyway. For instance, if their client or employer requires subcontractors to have their own insurance policies, you’ll need to purchase one. Also, as a self-employed businessperson, you may simply want to guard against having to pay for on-the-job injuries out of pocket, since most health-insurance plans do not extend to workplace injuries. 

If you’re a business owner hiring subcontractors, the need for Workers’ Comp insurance depends on whether subcontractors are considered employees in your state. This varies from state to state, so you’ll want to check the laws before you make any hiring decisions. Typically, workers who receive a W-2 tax form are considered employees, and workers who receive a 1099 are considered contractors. However, some states require Workers’ Comp policies for 1099 contractors as well, so it’s best to check your state’s laws or confer with a business lawyer before making a decision.   

In addition to Workers’ Comp, self-employed and independent contractors may want to think about purchasing general liability insurance, commercial auto insurance, and professional liability insurance (or errors and omission – E&O insurance) to safeguard against lawsuits and out-of-pocket costs. Many self-employed workers will bundle Workers’ Comp with one or more of these coverages to save money. It’s always a good idea to consult with a business attorney who can help determine the kind of coverage you need, and make sure that you’re abiding by your state’s laws.

>>MORE: Best 7 Workers’ Compensation Insurance Companies for Small Business

Final Thought

Workers’ Compensation insurance is a must for almost any business. Be sure to remember that laws vary by state, so there’s no one-size-fits-all coverage. If you have employees, it’s against the law to operate without Workers’ Comp coverage, and the penalties can be steep, so don’t wait! Fortunately there are many companies offering good Workers’ Comp deals to small businesses, and you shouldn’t have any trouble finding a policy that’s right for you and your business.

>>MORE: How Much does Workers’ Compensation Cost?

Thang Truong

Thang Truong covers small business insurance and small business success at BravoPolicy. He is a licensed P&C insurance agent. Previously, he held product leadership positions at realtor.com, Capital One, NerdWallet, and Mulberry Technology. He holds a MBA degree from UC Berkeley - Haas School of Business.

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