Although most states require employers to carry workers' compensation insurance, some companies can apply for exemptions from this coverage for certain workers. Here's a look at which type of entities are exempt from workers' compensation insurance.
Exemptions for Independent Contractors
Independent contractors are not covered by workers' compensation plans because they're expected to take out their own business expenses for insurance. An independent contractor accepts that he or she is not a true employee of the company, and therefore is not entitled to employee benefits. Many times, the purpose of hiring an independent contractor is part of a cost-cutting solution for the company.
While the IRS has its definition for what qualifies a worker to be an independent contractor, state guidelines for such workers may differ. Keep in mind that a state can impose fines on companies that do not correctly classify independent contractors.
Ineligible Claims
Another way a company can avoid paying workers' compensation is if an employee gets injured from the violence they caused. Any type of violation of the law or company policies can nullify a workers' compensation claim. The insurance also does not cover injuries to employees while they are away from the workplace.
Process for Workers' Compensation Exemptions
The process for filing a workers' compensation exemption varies from state to state, as some states automatically categorize non-employees as exempt. A state screening process is initiated for companies applying for workers' compensation exemptions. The company should file a "Notice of Election to be Exempt from Workers' Compensation" at a local workers' compensation office. This filing process requires presenting the following items:
- employee information
- description of business type
- current business license
- proof of business ownership
- contact information
- application fee
Once the application is approved, the company will be sent a certificate as proof of exemption. The employer then will not be required to cover exempt individuals.
Talk with a Workers' Compensation Expert
It's crucial for companies applying for workers' compensation exemptions to talk with a workers' compensation expert to ensure compliance. Since every state has its own workers' compensation laws, exemptions can be complicated. Getting all the facts before filing for an exemption will help prevent unnecessary fines or complaints from employees. Furthermore, not all workers' compensation insurance plans offer the same benefits, as each company must customize its coverage.
While workers' compensation can help companies maintain healthy workforces, in some cases exemption from workers' compensation may be necessary. It's a cost-cutting measure and can get complex, which is why you should talk with an experienced agent. Contact the experts at
Fuller Insurance in Southern California today for more information on how to maintain affordable insurance rates.
