Work compensation laws in America
Workers’ compensation insurance is mandatory in most states, but regulations can vary widely. The majority of states have a single employee minimum, which means that there is a requirement that a business must carry workers’ comp insurance if they have even one employee. A handful of other states, like Alabama and Tennessee, have a multiple employee minimum. These states have a higher employee minimum threshold and require that a business have five or more employees before they are required to buy workers’ comp insurance. Different states might have different minimums, like Virginia (2 employees), New Mexico (3 employees), and Rhode Island (4 employees). There are also two outliers: Texas and Kansas. In Texas, no workers’ comp required at all. It is the only state that does not require employers to carry workers’ compensation insurance. Kansas is the only state with a payroll minimum. This means that only businesses who reach a certain payroll threshold must carry workers’ comp insurance. In Kansas, that threshold is $20,000.
Most states also require that businesses purchase workers’ comp insurance through private carriers, but some states have their own state-administered funds. These states are: California, Alaska, Idaho, Louisiana, Maine, Maryland, Michigan, Montana, New Mexico, New York, Oregon, Pennsylvania, Rhode Island, Texas, Utah, Washington, Virginia, and Wyoming. These states give buyers the option of purchasing insurance through the state-administered fund. Additionally, in some states, such as Wyoming and North Dakota, the only workers’ compensation insurance option is through the state-administered fund.
Most states also give employers the option to self-insure, which means that the employer takes on the burden of paying out its own workers’ comp claims. Being a self-insured business can be risky. While the business may make short-term financial gains by not having to pay insurance premiums, it may lose more money in the long run if it must pay out multiple workers’ comp claims or even make a single, costly workers’ comp payout. The other option is to purchase workers’ comp for employers.
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Exceptions to workers’ comp for employers
There is also variation between states regarding what kinds of exceptions are permitted when it comes to carrying workers’ comp insurance. In some cases, these exceptions may reflect economic situations in a particular state. For example, Tennessee state law says that all employers with five or more employees must carry workers’ compensation insurance. However, it also stipulates that all construction and coal mining businesses must carry workers’ comp insurance, regardless of how many employees they have. Mining accounts for more than 48,600 jobs in Tennessee and generates billions of dollars for the local economy, so it is a critical part of the state’s livelihood. This exception makes the existing work compensation law stricter for those businesses, but it also ensures that all construction and coal mining workers are protected.
In contrast, less stringent application of workers’ comp laws occurs in other instances. Pennsylvania, for example, allows exceptions for farmers who have only one seasonal employee (working fewer than 30 days per year). Oklahoma insurance law has an exception for family businesses that meet certain requirements.
These types of exceptions are usually designed as common-sense solutions to work compensation requirements. A small business owner may only employ her two children as employees, and may not wish to purchase workers’ comp insurance for her family members, particularly for such a small business. Likewise, many states have exceptions for agricultural employers, who often employ seasonal workers.
However, it is possible to purchase short-term plans, and CompSource Mutual advises that businesses do so, even if it is not required by the state. Particularly in high-risk industries, such as agriculture, workers’ compensation insurance can provide an important safety net for both employers and employees.
Obtaining a workers’ comp policy
Many business owners choose to purchase commercial workers’ comp insurance policies. They can shop around for the best worker compensation rates, just like with any other type of insurance.
CompSource Mutual has operated in Oklahoma for 85+ years. Our staff has a deep understanding of Oklahoma industries, such as the oil and gas industry and the wholesale industry.
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In states like North Dakota, where the only option for obtaining workers’ comp insurance is through the state, it is usually not possible to purchase a commercial plan or self-insure. In those cases, business owners must buy insurance directly from the state, usually through a state-administered website. States with state-administered funds offer different methods to purchase coverage, such as an online application or through a business license application stream.
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Workers’ compensation coverage needs to make sense for your business. Our team is dedicated to understanding Oklahoma businesses like no one else so we can provide coverage at a fair price. Get protected with CompSource Mutual.
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Is workers' comp mandatory?
It depends. Workers’ comp insurance is mandatory in many states, but there are also exceptions to this rule. Typically, any business with at least one employee must carry workers’ comp insurance, but this is not true for every state.
Who is exempt from purchasing workers' comp insurance?
Businesses based in Texas do not have to purchase workers’ comp insurance. Texas is the only state in which this type of insurance is not mandatory for most businesses. Otherwise, states have a wide variety of exemptions for certain businesses, including agricultural businesses with temporary workers, family businesses, and small businesses with fewer than five employees. This depends on the state that the business is based in.
What is Oklahoma's work compensation policy?
Oklahoma requires that all businesses with at least one employee carry workers’ compensation insurance. However, exceptions may apply.
How much does workers' compensation cost if a business is self-insured?
This can vary widely depending on the state and the business’s industry. It is usually quite costly, and many businesses need to specifically apply to be self-insured. These businesses must prove that they are financially prepared to adequately compensate employees.
How long does workers' comp last?
Workers’ comp for employers lasts one year. After one year, or at the end of the policy period, the insurance company will conduct a workers’ comp audit and reassess the company’s premiums. Then the company will be quoted a potentially new rate for the following year or policy period.
Need more information? Read more about the audit process.
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