Who needs to obtain workers’ compensation coverage?
All businesses (except construction) with 4 or more employees, full-time or part-time. [Corporate officers count as employees unless the officer has applied for and been issued an exemption.]
All construction industry businesses, unless the business owners have exemptions and there are no employees. The owner is included unless he/she specifically files for an exemption. (Please see below for more details on exemptions.)
Who can get an exemption?
Only the owners of businesses are allowed to be exempt. Employees are never allowed to exempt out of workers’ compensation coverage.
Construction Businesses: Exemptions in the construction industry cost $50 each and must be renewed every 2 years. Exemptions must be applied for online with the Division of Workers’ Compensation. >> Click here to apply for an exemption. <<
Corporations: A corporation can exempt up to 3 of its officers. Each officer must own at least 10% of the corporation’s stock.
LLC’s : An LLC can exempt up to 3 of its owners (called “managing members”) and each one must own at least 10% of the LLC.
Sole Proprietors and Partners Sole proprietors and partners in the construction industry cannot exempt out of workers’ comp. Sole proprietors and partners must purchase workers’ comp coverage if they wish to remain working legally.
Non-Construction Businesses: Exemptions for non-construction businesses are free and last a lifetime* or until they are revoked by the exemption holder. Business owners can get an exemption by filing form DWC 250 – Notice of Election to be Exempt. Exemptions must be applied for online with the Division of Workers’ Compensation. >> Click here to apply for an exemption. <<
Corporations: Officers of a corporation are those people who own the corporation and hold an office on its Board of Directors. Non-construction businesses can exempt all of their officers – there is no limit to the number of exemptions. There is no charge for an exemption for a corporate officer whose company is not construction-related.
LLC’s: Currently, there is no mechanism in the law for LLC owners of non-construction businesses to receive exemptions. It is up to individual insurance companies whether to include or exclude LLC owners from workers’ compensation coverage. However, effective July 1, 2013, owners of non-construction LLC’s will be considered employees unless they receive an exemption.
Sole Proprietors and Partners: Sole proprietors and partners are automatically excluded from workers’ comp; they do not have to get an exemption. If they wish to be covered by workers’ compensation, they must file form DWC 251 – Election of Coverage with the Division of Workers’ Compensation. If they want to go back to being excluded from workers’ comp, they can file form DWC 251R – Revocation of Election of Coverage.