What is a Workers’ Comp Exemption and How Do I Get One?

Construction Workers Discuss Workers’ Comp Exemptions

What is a Workers’ Comp Exemption and How Do I Get One?

All states except for Texas require that businesses with a specified minimum number of employees (usually three to five) must have workers’ compensation insurance. This insurance helps protect companies in the event of an employee being injured while on the job.

In some cases, certain people within companies may obtain workers’ comp exemptions. Typically those who can obtain workers’ comp exemptions are partners, owners, or executives, and depending on the industry there may be a limit on the number of employees eligible for workers’ comp exemptions.

In the state of Florida, for example, construction businesses with employees are required to obtain workers’ compensation coverage. The business owner, and those with at least 10% ownership in a corporation or LLC are eligible, but no more than three people from one company can obtain workers’ compensation exemptions. Other employees may not be exempted from workers’ comp coverage.

Misconceptions About Workers Comp Exemptions

Those who work outside the construction industry may believe that there is no limit on the number of people who can obtain workers’ compensation exemptions, but that is not the case. For corporations outside the construction industry (again, using Florida as an example), there may be no limit to the number of corporate officers eligible for a workers’ compensation exemption, but applicants may be required to be listed as officers of the corporation to qualify.

For limited liability companies (LLCs), applicants for workers’ compensation exemptions must have proof of a minimum of 10% ownership in the LLC. Therefore, no more than 10 members of an LLC may obtain exemptions. For both corporations and LLCs, inside or outside the construction industry, exemptions are not permanent, but are only valid for a specified period of time (for example, two years in Florida).

How to Apply for a Workers’ Compensation Exemption

You may be able to apply for a workers’ compensation exemption online. For example, in Florida, the Division of Workers’ Compensation offers an online portal titled “Notice of Election to Be Exempt” where applicants can electronically submit their exemption application and payment, where required. Other states typically have similar online portals.

Once an application is submitted, the state’s Division of Workers’ Compensation reviews the application to determine if eligibility for exemption is met. In Florida, the Division of Workers’ Compensation has 30 days in which to review an application. Upon review, the Division will take one of the following actions:

• Issue a Certificate of Election to be Exempt, which will be mailed to the address the applicant filled in on the application
• Notify an applicant by mail that the application is incomplete and what information is needed
• Deny the exemption

When exemptions are granted, the state’s Proof of Coverage Database will be updated to reflect this. The state can revoke workers’ compensation exemptions if the person exempted no longer meets the requirements of eligibility.

SourceOne Partners Can Help With Workers’ Comp Exemptions

Managing workers’ compensation claims is essential to the health of your business, and many companies choose to outsource this process to a Professional Employer Organization (PEO). Employers must ensure they understand all their state’s workers’ compensation rules, because not doing so can increase liability, increase rates, and could result in cancellation of the workers’ compensation insurance policy.

Choosing a PEO to manage your company’s workers’ compensation administration increases efficiency, and increases your peace of mind. SourceOne Partners are PEO brokers who can help you select the right PEO company at the best possible rate, so you can focus on your core business while keeping risks under control. SourceOne Partners has locations in South Florida and New Jersey, and works with PEOs licensed in all 50 states. We can help you enjoy the many benefits of outsourcing workers’ compensation management and other HR functions affordably, so you can be confident your company is in compliance with all workers’ compensation regulations. Contact us online or call us at 561-674-0748.