Under the workers' compensation system, employees are entitled to lost income and medical expenses when they suffer a work-related injury or illness, regardless of who was at fault. In return for these benefits, employees give up the right to sue their employers for workplace injuries.
To make workers' comp insurance an effective replacement for civil litigation, virtually all state governments require that employers carry coverage. (Texas is the lone exception.) But there are certain job categories and types of business that are exempt from workers' comp laws.
The vast majority of states require every business with at least one employee to offer workers' comp coverage. However, there are a handful of states where the workers' comp insurance requirement doesn't kick in until a business has a few more employees—typically between two and five, depending on the state.
Some states exempt the following business owners from workers' comp coverage:
In some states, a business can choose whether or not to purchase workers' comp insurance for these individuals. In other states, business owners are automatically covered, but can opt out of coverage.
Certain types of workers are exempt from workers' comp coverage. While these job categories vary from state to state, the most common types of exempt workers include:
Independent contractors and volunteers usually are not covered by workers' comp because they aren't employees. These workers are not technically "exempt"; employers don't need to purchase workers' comp insurance for them in the first place.
Employers are not required to offer workers' comp coverage for independent contractors. However, the fact that a worker is called an independent contractor and receives a 1099 tax form doesn't necessarily mean that they are an independent contractor. The legal test for whether workers are employees or independent contractors typically depends not on how they are classified, but on how much control they have over their work.
Some employers may misclassify workers as independent contractors in order to avoid paying for their payroll taxes and workers' comp insurance. Others may intend to hire an independent contractor, but consistently treat that worker as an employee. If a worker classified as an independent contractor can prove that they were actually an employee, then they are entitled to workers' comp benefits.
Volunteers generally aren't entitled to workers' comp coverage, but there are some exceptions. For example, some states require coverage for volunteer firefighters or police officers.
The federal government has its own workers' compensation system for injured federal employees. Federal law also has separate rules for compensating railroad employees and maritime workers who suffer work-related injuries. While the system for railroad employees is not a workers' comp system—workers are required to prove their employer's negligence and that the negligence was a cause of their injury—the system for certain maritime workers is essentially a federal version of standard state workers' comp.
To claim a workers' comp exemption, business owners generally need to file a form with a state-approved commission or board. Even if an employer qualifies for a workers' comp exemption for some of its workers, it may still need to purchase workers' comp insurance for others.
Many businesses that qualify for an exemption choose to purchase workers' comp insurance anyway. States usually allow exempt employers to opt in to the workers' comp system. This provides benefits for employees, as well as protection from liability for employers. The cost of paying workers' comp premiums may be significantly less than the cost of even one settlement or verdict if a worker who isn't covered by workers' comp files a lawsuit for an on-the-job injury.
If you were injured at work and your employer is claiming you're exempt from workers' comp coverage, consider contacting an experienced workers' compensation attorney to discuss your legal options. A lawyer can help you file a workers' comp claim and appeal if you've been denied. And, if you're truly exempt from workers' comp coverage and your employer was at fault for your injury, an attorney can help you file a lawsuit against your employer in court.