(Newswire.net — April 1, 2022) —
Adding to the complexity of business insurance, each state has its own set of laws when it comes to workers’ compensation. Some states require that companies offer workers’ comp insurance via a state fund, while other states allow companies to choose between using a state fund or self-insuring. Others enable companies to select between private insurers, a state fund, and self-insurance. Others do not allow any choice.
The bare minimum benefits that must be paid to injured employees vary from state to state. Those benefits are also dependent on your industry classifications, among other factors. With so much variation in the workers’ comp system, compliance can feel like a moving target, especially if your business operates in more than one state.
Following are some interesting statistics that demonstrate how workers’ compensation laws and regulations may differ from state to state.
Requirement to Carry Workers Comp
In every state except Texas, employers must have workers comp insurance. That typically applies if employers have at least one employee, although in some states, there is a minimum of between two and five employees. Some states exempt businesses in the agricultural and construction industries, as well as charities.
Some states that require workers’ comp insurance also make it costly to fail to meet that requirement. For example, in California, it’s a criminal offense not to provide employees with workers’ compensation. The crime can land a business owner in prison for up to a year and cost upwards of $10,000 in fines. Likewise, employers who are required to but fail to carry workers comp insurance may face misdemeanor or felony charges, and fees up of to $50,00, plus an added penalty of $2,000 for every 10 days they continue to operate without coverage.
Premium Rates
With a national average premium rate of $0.82, North Dakota has the lowest rate in the country, while New York has the highest rate, at $3.08. Wisconsin comes in at $2.02, which puts it in the center of the pack.
Key Definitions
Each state may have a different definition of a “covered employee.” The U.S. Internal Revenue Service says two things define an employee: 1) control — the work being done and how it’s performed, along with how the worker is paid; and 2) relationship — in other words, if the worker gets benefits that are typically reserved for employees, like a pension or sick pay, the permanency of the work arrangement, and if the services provided are critical to the company. Twenty seven states have laws on the books that differentiate employees from contractors.
Standardization
Sixty-six states are members of the National Council on Compensation Insurance (NCCI), which is a rating bureau that develops a standardized classification system, calculates rates, files reports with state regulators, and provides other services to insurance companies.Because each state has its own workers compensation laws, the oversight of those stipulations are enforced on a state-by-state basis.
While the NCCI offers some standardization among member states, each state also has its own Workers Compensation Board. Appointments to the board are usually made by the state’s governor. Different boards operate differently, with varying numbers of commissioners and terms. However, their function is the same: to set the rules and regulations for workers compensation in the state and review disputes.
Exemptions
Some small businesses and small business owners can get exemptions from paying the cost of workers comp insurance. Individuals who are considered temporary contractors may also be able to get exemptions as well. Typically, this applies to freelancers and domestic workers employed in private homes by families, as well as seasonal workers. A workers compensation waiver or exemption form may be used, although the process for getting such an exemption varies wildly from one state to another. For example, some states require contract workers to affirm that they are “free from control” of the company for which they are performing work. Sole proprietors and limited liability companies may also access an exemption in some states.
Claims Processes
Because each state’s Workers Comp Board sets its own rules and regulations, the processes for filing claims can differ across state lines. However, generally, employers must post required notices in convenient locations to inform workers about their rights, including to receive medical help if they’ve been injured on the job, provide details about the available workers comp benefits, and list the name of the company’s worker’s comp insurance carrier. Generally, employers must also provide workers who have been injured on the job with a claim form within 24 hours of receiving notice that an injury occurred.