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Workers Comp Exemptions by State
Every state sets its own workers comp rules. Some exempt small employers, others exempt certain trades — knowing your state’s rules is the first step to getting covered correctly.
- ✓Employee count thresholds vary by state — some require coverage at 1 employee
- ✓Construction trades face stricter requirements in most states
- ✓Corporate officers and LLC members can often file exemptions
- ✓State fund monopolies in 4 states require buying from the state
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How State Workers Comp Laws Vary
Workers compensation is regulated at the state level, which means there are 50 different sets of rules. The federal government doesn’t mandate a specific workers comp structure — each state sets its own threshold for mandatory coverage, its own benefit levels, and its own rules for who can be excluded.
The most important variable is the employee count threshold. Most states require coverage when you have one or more employees. Some states (like Alabama, historically) allowed thresholds of 5 employees before coverage was mandatory. For contractors, even states with higher thresholds often have construction-specific rules that reduce the threshold to zero or one for licensed contractors.
Even in states where you’re technically exempt, many licensing boards and public contracts require you to carry coverage. The state exemption prevents a fine — it doesn’t prevent a contract requirement.
States with Specific Construction Industry Rules
Florida is the most prominent example of strict construction-specific rules. In Florida, virtually all construction contractors must carry workers comp or have an active exemption on file with the state. The exemption process is specific — you must apply through the Division of Workers’ Compensation, pay a fee, and renew annually. Violations carry severe penalties including stop-work orders and fines equal to two times the premium that would have been owed.
California requires all employers — including sole proprietors in some circumstances — to carry workers comp for employees. The classification of workers as independent contractors versus employees has been an ongoing legal battleground, with laws like AB5 making it harder to use 1099 classification for construction workers.
New York requires workers comp for virtually all employers, including single-member LLCs with no employees in some circumstances. New York also has a state-run competitive fund (NYSIF) and a private market — you can choose either.
Monopolistic State Fund States
Four states — North Dakota, Ohio, Washington, and Wyoming — require all employers to purchase workers comp from the state’s workers compensation fund. Private insurance carriers are not allowed to sell workers comp in these states.
If you’re a contractor based in one of these states, you obtain coverage directly through the state fund. If you do occasional work outside your home state, you may need an all-states endorsement on your policy to cover those extraterritorial exposures.
Wyoming and North Dakota tend to have relatively straightforward systems. Washington’s L&I (Labor & Industries) system is more complex with unique rules around prevailing wage projects and construction classifications.
Corporate Officer and LLC Member Exemptions
Most states allow corporate officers, LLC members, and partners to file exemptions removing themselves from workers comp coverage. These exemptions are separate from the general employer mandate — even if your business is required to carry workers comp for employees, owners can often be excluded.
The exclusion process varies. In many states, the carrier processes the exclusion with an endorsement. In others — particularly Florida for construction — you must file with the state board directly. An invalid exclusion (carrier notation only in a state that requires state filing) can be challenged if an excluded owner is injured.
Keep copies of all filed exemptions and renewal confirmations. When you change carriers, ensure the exclusion is re-documented with the new carrier and, where required, re-filed with the state.
Confirming Your State’s Requirements
The definitive source for your state’s workers comp requirements is your state’s workers compensation board or division. Most state agency websites publish the current employer requirements, thresholds, and exemption procedures.
An independent insurance agent licensed in your state can also walk you through the specific requirements for your entity type and trade. Getting clear on your obligations takes 15 minutes and can save you from a compliance violation — or from carrying coverage you didn’t need.
When you work in multiple states — doing jobs in neighboring states, for example — check each state’s requirements. Your workers comp policy should include an all-states endorsement to cover extraterritorial exposure, and some states require specific endorsements rather than accepting the all-states coverage.
Why Contractors Use Trade Safe Insurance
Independent Agency
We compare dozens of carriers to find the best rate and form for your trade, payroll, and claims history.
Same-Day COI
Certificates issued the same day — often within the hour — so no job site delays waiting for paperwork.
Hard-to-Place Welcome
High EMR, prior claims, or specialty trades? We work in non-admitted markets where others stop.
20+ Years Experience
Decades of placing contractor workers comp means we know the class codes, carriers, and audit traps to avoid.
Frequently Asked Questions
Which states don’t require workers comp? +
Texas is the notable exception — it’s largely voluntary for private employers. Most other states have some form of mandatory requirement, at least above a threshold.
How many employees trigger workers comp in most states? +
One or more employees triggers mandatory coverage in most states. Some states allow higher thresholds for non-construction employers.
Can I operate in multiple states on one workers comp policy? +
Yes. An all-states endorsement extends your coverage to employees working outside your home state. Some states require state-specific endorsements.
What is a state fund for workers comp? +
Four states (ND, OH, WA, WY) require coverage through a state-operated insurance fund. Private insurers cannot sell workers comp there.
Do contractor licensing boards require workers comp? +
Many states require proof of workers comp as part of contractor license issuance or renewal, even if the employer mandate threshold hasn’t been met.
Is workers comp required for a sole proprietor in Florida? +
Florida has strict construction industry rules — sole proprietors in construction must either carry coverage or have an active state-filed exemption.
Know Your State’s Rules Before You Get a Fine
We’re licensed all 50 states and can confirm exactly what your state requires for your entity type and trade — then get you covered the same day.