While the actual requirements vary from state to state, there are some common instances where certain classes of employees may be exempt from workers comp. Insurance. 

Fewer Employees than Required by Statute

Thirty-nine states and the District of Columbia require every employer with one employee or more to provide workers’ compensation coverage. However, 11 states allow employers to forego coverage until they surpass a certain threshold number of employees; once eclipsed, it becomes necessary for employers in those states to provide work comp benefits. A few “threshold” states lower the threshold number if the employer falls within a contractor classification or involves contact with ionizing radiation.

Workers’ compensation protection is not required in these states when the number of employees falls below the requisite number specified by the state (generally between three and five). Knowing the threshold is paramount when placing workers’ compensation for multi-state clients.

The eleven states with a number threshold greater than one are: Alabama (5+); Arkansas (3+); Florida (4+); Georgia (3+); Mississippi (5+); Missouri (5+); New Mexico (3+); North Carolina (3+); South Carolina (4+); Tennessee (5+); and Virginia (3+). Five of these states lower the threshold if the insured is within a construction classification: Arkansas (2+); Florida (1+); Missouri (1+); New Mexico (1+); and Tennessee (1+).

Casual Labor – No Workers’ Compensation Required

Workers engaged in casual labor on behalf of the employer are not considered “employees” and are not required to be protected by a workers’ compensation policy. This exclusionary provision applies in nearly every state, with each applying different requirements to the exception. States may:

• Define casual labor and exclude the requirement to provide protection. Some states apply subjective terms to this definition such as “brief,” “occasional,” “irregular,” “sporadic,” or “infrequent,” which may require arbitration or litigation to objectify;
• Assign a maximum dollar limit that can be paid or a maximum number of days the job can last before the work is no longer considered “casual;” or
• Assign several “casual employees” allowed.

Casual labor is generally defined as work not in the usual course of trade, business, occupation, or profession of the employer (contracting party). This could include relationships such as a manufacturer hiring a landscaping company to maintain the grounds; or the owner of an insurance agency hiring a carpenter to upgrade the office. The contractors hired are not performing duties that any employee would normally do; they are doing work outside the normal operational requirements. Essentially, a casual laborer does not directly promote or advance the employer’s business or operation.

Commissioned Real Estate Agents

Many states remove the requirement to provide workers’ compensation protection to real estate agents or subagents paid purely on a commission basis. This exclusion does not apply in every state.

The above are the most commonly found exclusions to the workers’ compensation requirements; however, several beyond these may only apply in a few states. Such limited exclusions include:

• Volunteer ski patrol employees;
• Members of the clergy;
• Some taxicab drivers;
• Professional athletes;
• Athletic contest officials;
• Officers of non-profit associations and corporations;
• Direct sale people (i.e., Mary Kay consultants and directors);
• Newspaper re-sellers; and
• Musicians/performers.

This is not an all-inclusive list.

What happens, though, if an exempt employee is injured?  The employee can still sue the employer for their injuries even if exempt from the policy.  Part 2 outlines how and where your company can protect itself.