Workers' Compensation Laws by State

Any business that relies on employees runs the risk of claims related to employee injury or illness at some point. Having workers' compensation insurance can exempt your business from employee lawsuits for work-related injury, illness, or disability, and provide injured workers with reimbursement for medical expenses and a portion of lost wages. Depending on your state's workers' compensation laws, your business may also be legally required to obtain this coverage.

A local independent insurance agent can help your business get set up with all the required workers' compensation insurance in your state. They can also explain your state's workers' comp laws and requirements, as well as your expected workers' comp costs. But for now, here's an overview of workers' comp laws by state and how to know if your business needs coverage.

What Is Workers' Compensation Insurance?

Workers' compensation insurance is an insurance policy that is purchased by an employer or subcontractor to cover medical expenses, rehabilitation costs, disability benefits, death benefits, and partial wage replacement for injured, ill, or disabled workers. Most states mandate that employers have a workers' compensation policy. 

A workers' compensation policy should be obtained if you have even one employee or if you are a subcontractor to protect yourself from paying out of pocket for medical expenses. Providing this coverage automatically exempts your business from employee lawsuits for covered incidents.

To be covered by workers' comp, an injury, illness, fatality, or disability must have been caused by the job in some way. A workers' comp claim can be covered if the injury, illness, etc. was caused directly by required job duties, the work environment, or if a disability develops over time due to repetitive motions required of the job.

What States Require Workers' Compensation Insurance?

Each state requires workers' compensation insurance in some form except for Texas. Knowing what your state guidelines are regarding coverage, when you need to obtain it, and how it works is essential for business owners. 

Luckily, your local independent insurance agent can help. Your agent can explain your state's workers' compensation laws in depth and ensure you obtain at least the required amount of coverage for your business to comply with state laws. 

What Are Workers' Compensation Exemptions?

Most states have a few exemptions for which businesses must obtain workers' comp. These exemptions may be based on a business's classification (e.g., LLC, corporation, sole proprietorship, etc.), the number of employees it has, or the industry it belongs to. Many states make exemptions for businesses within the agricultural niche.

New York State, for example, makes workers' comp exemptions for the following:

• Partnerships, LLCs, and LLPs without any employees
• Businesses that only work with members and partners
• Sole proprietors without employees
• Businesses that are one or two-person-owned corporations in which these individuals own all the stock, hold all offices, and have no employees

Ask your independent insurance agent about workers' compensation insurance exemptions in your state, or visit your state's Board of Workers' Compensation website to learn more.

Workers' Compensation Insurance Laws by State

Select your state on the map below to find out the workers' comp laws in your area.

Workers' Compensation Benefits by State

Workers' comp benefits may vary in specifics depending on your business's policy. However, in general, workers' comp benefits can pay for the following:

• Medical treatments for covered employee injuries and illnesses
• Rehabilitation costs to get injured or ill employees back to work
• Ongoing care expenses, including surgery or physical therapy
• Partial lost wage replacement, typically up to two-thirds of an employee's typical pay
• Death benefits and funeral expenses
• Rehiring costs for the business

Workers' comp can cover many expenses related to an employee's care if they sustain an injury, disability, or illness due to their job. Coverage can replace a portion of an employee's salary or wages while they're off work recovering. 

Workers' comp can also provide death benefit payouts to a beneficiary if an employee dies due to a workplace accident. Further, workers' comp can reimburse the employer for rehiring expenses if an employee must be replaced due to a covered severe injury, illness, or disability.

What's Not Covered by State Workers' Comp Laws?

Workers' comp has several exemptions that are important to be aware of, and they tend to be similar across the country. Don't expect your workers' comp policy to cover any of the following:

• Employee injuries, illnesses, and disabilities not caused by their job
• Injuries, etc. that occur while an employee is intoxicated on the job
• Injuries, etc. that occur due to an employee's negligence on the job
• Self-inflicted or intentional injuries, etc.

To cover non-work-related injuries, illnesses, etc., private health insurance would be required. Keep in mind that the reverse is also true, and private health insurance policies typically won't cover work-related injuries, illnesses, etc.

State Penalties for Failure to Comply with Workers' Comp Requirements

If your business fails to comply with its state's workers' comp laws and regulations, it may be subject to a penalty. These penalties typically include fines, jail time, or a forced suspension of operations until the required coverage is obtained. 

Penalties may also range in severity depending on the length of time of the offense and how many employees the business failed to cover with workers' comp. Here are a few examples of specific state penalties for failure to obtain workers' comp.

California

• A fine of $10,000, or
• Up to one-year prison sentence, or both
• An additional $100,000 civil penalty

Georgia

• A fine of between $1,000 and $10,000
• A prison term of up to one year
• A criminal misdemeanor offense

Illinois

• A minimum fine of $10,000
• A fine of up to $500 per day of noncompliance with coverage mandates

Kansas

• A fine equal to twice the annual premiums the business would have paid for workers' comp insurance, or
• A fine of $25,000, whichever is greater

New York

• $2,000 fine for every 10-day period without the required coverage
• Specific fines for the number of employees without coverage, including:
  • $1,000 to $5,000 for five or fewer employees
  • $5,000 to $50,000 for more than five employees
• Criminal penalties, including:
  • A misdemeanor for failure to obtain coverage for five or fewer employees within a 12-month period
  • A class E felony for failure to obtain coverage for more than five employees within a 12-month period

Any employer who willfully fails to obtain workers' comp coverage may severely hurt their business's finances. An independent insurance agent can help you understand the workers' compensation laws and regulations in your state, including penalties for noncompliance. You can also visit your local State Board of Workers' Comp or Division of Labor website to learn more.

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The Benefits of an Independent Insurance Agent

When your business is ready to obtain the proper coverage to comply with state workers' compensation laws and regulations, no one's better equipped to help than an independent insurance agent. These agents have access to multiple workers' comp insurance companies, so they're free to shop and compare policies and rates for you. 

They'll get you matched to a policy that offers the best blend of coverage and cost while satisfying your state's coverage requirements. And down the road, your agent will still be there to help update your coverage as your business's needs evolve and can even file workers' comp claims for you.