Remote employees and workers' comp: coverage, claims and state rules

Yes, an employee who works from home is generally covered by workers' compensation, but only for injuries that arise out of and happen in the course of the job, and the state whose law applies is usually the state where the employee works, not where your headquarters sits. For an employer, a remote hire in a new state is a coverage and payroll question first and a claims question second: tell your carrier before the person starts.

Which state's workers' comp applies

Workers' comp is state law, so a remote employee in a different state from your office pulls that state's rules into your program. The Hartford puts it plainly in its guidance to employers: coverage "is usually based on where the employee works, not where your business is located." Several states can claim a worker (state of hire, state of residence and work, state of injury), as explained in employees in several states: other-states coverage and multistate workers' comp. In practice, the state where the remote worker lives and works is the one that matters most.

Consequences for the employer:

• The policy must list the state. The standard NCCI policy, WC 00 00 00, lists states in Item 3.A. A new remote hire in a state you have not listed can be handled under Part Three, Other States Insurance, if you tell your carrier at once, but the carrier will add the state and charge premium for the payroll there. See employees in several states: other-states coverage and multistate workers' comp.
• Requirements differ by state. Thresholds, exemptions for owners and officers, and whether comp is mandatory for a single employee vary. Check workers' comp requirements by state: who must carry it and workers' comp and benefits requirements by state.
• Exclusive-fund states need state-fund coverage. North Dakota, Ohio, Washington and Wyoming do not allow private comp insurers. A remote employee in one of them is covered through the state fund (Wyoming mandates coverage only for listed extra-hazardous work) and a separate employers liability policy, called stop-gap coverage. Out-of-state employers often learn this when the first payroll runs, so ask before you hire. See Monopolistic state funds: workers' comp in ND, OH, WA and WY.
• Some states register employers. A remote employee can trigger a state's employer registration, unemployment, withholding and comp rules together. Payroll and HR usually find out first. Loop in your broker at the same time.
• Premium follows payroll and class. Most remote employees in office-type work are rated under the clerical office class, code 8810 in the NCCI system, which carries one of the lowest rates. Remote salespeople, installers or others who work in the field are rated by what they do. See workers' comp class codes and why they matter. A small rate on an office class can still differ widely by state. Use the workers' comp premium calculator to model a new state, with the carrier's actual rates.

When a home injury is covered

Every state's act uses the idea of injury arising out of and in the course of employment, with its own wording and case law. Commentary by insurers and law firms suggests a home injury is more likely to be compensable when:

1. The employee was doing job duties during agreed work hours.
2. The injury is tied to the work: a fall over a power cord running to the work desk, an ergonomic strain from the work station, an injury while handling company equipment.
3. The employee was in the designated workspace or moving between the work area and a necessary break.

The same sources describe common reasons claims are contested:

• Personal activity. A slip while carrying laundry or answering the door for a personal delivery is usually treated as personal. Brief breaks, such as a restroom visit or a glass of water, are often handled under the personal comfort doctrine, so they usually stay covered, though state law varies.
• Coming and going. A worker's commute is normally not covered. For remote workers, courts in some states ask whether the home office is an approved fixed work location, and whether moving between rooms is a commute or part of work.
• Pre-existing conditions and intoxication, which a claims examiner will look at.
• Whether the work at home was authorized. The employer's telework policy and the employee's schedule matter. A worker hurt while working in a way the policy forbids may face a defense that the activity was outside the job.

A stray rule from a single state is not a national standard. Compensability is decided by the carrier and the state's comp agency under that state's law, and the answer can change with the facts. If an injury happens at a remote employee's home, treat it as any other claim: follow reporting a workplace injury: what employers must do and the workers' comp claims process for employers and let the carrier investigate.

Safety duties and OSHA recordkeeping

Federal OSHA addresses home offices in Directive CPL 2-0.125, "Home-Based Worksites," effective February 25, 2000. It says OSHA will not conduct inspections of employees' home offices and will not hold employers liable for them. For other home worksites, such as home manufacturing, OSHA inspects only on a complaint or referral involving serious hazards, imminent danger or a fatality, and employers are responsible for hazards caused by the materials, equipment or work processes they provide or require. The OSH Act does not apply to an employee's house or furnishings.

Recordkeeping still applies. The directive says employers that must keep injury and illness records must record work-related injuries in a home office if they meet the recordability criteria of 29 CFR Part 1904. A remote worker's injury that is OSHA recordable injury belongs on the log. State plans may have their own telework rules, so confirm with your state agency.

How to protect the employer

1. Write a telework policy that names approved work locations, hours, equipment and the duty to report injuries immediately.
2. Send a simple ergonomic checklist and encourage a dedicated workspace, regular position changes, breaks and cord management.
3. Keep the carrier current. Update the state list and payroll by state when remote hiring changes. At the premium audit, the auditor allocates payroll by state and class, and incomplete records push payroll into the higher-rated option.
4. Document the remote job. Keep a job description, work schedule and timekeeping that show when the person is working.
5. Provide the claims route. Remote workers need to know whom to call and how to get care in their own state, including any panel of physicians a state requires.
6. Track independent contractors separately. A remote contractor is not automatically exempt; misclassification can turn into an uninsured employee claim. See independent contractors and workers' comp: the misclassification risk.

Worked example (hypothetical)

Say a software company based in Texas, which does not require most private employers to carry comp, hires a remote customer-support employee in California. California requires comp for employers with employees and the company's policy lists only Texas. The company tells its carrier before the start date. The carrier adds California to the policy, assigns the clerical class to the employee's payroll and issues the endorsement.

Six months later, the employee trips on a power cord during a shift and fractures a wrist. The employer reports the claim at once. The carrier applies California's comp law, covers medical care and wage replacement if the claim is compensable, and the employer adds the case to its injury log if it meets recordkeeping rules. Had the employer not listed California, the claim could have started with a coverage argument. The facts and the outcome are invented to show the sequence.

Key takeaways

• Remote employees are generally covered by comp for injuries tied to their job, under the law of the state where they work, with the exact test set by that state.
• Tell your carrier before a remote hire starts in a new state so the state is on the policy and payroll is rated correctly, usually under the clerical class for office work.
• Work in North Dakota, Ohio, Washington or Wyoming requires state-fund coverage plus a separate employers liability policy.
• Personal activities at home, unauthorized work and commutes are the common grounds for dispute; brief necessary breaks are often covered.
• OSHA will not inspect home offices or hold employers liable for them, but recordable injuries still go on the log.