Guides
Workers' comp requirements by state: who must carry it
Comp thresholds, owner exemptions, monopolistic states, the Texas opt-out and penalties for going uninsured, with a table covering all 50 states and DC.
Almost every state requires employers to carry workers' compensation, but the trigger is state law: one employee in most states, three to five in several, a payroll test in Kansas, and a choice in Texas. Four states are monopolistic and require you to buy from the state fund. Owners, family members, contractors and construction work get special treatment in many states, so check your state before relying on any national rule of thumb.
The four patterns
Coverage from the first employee. Most states, including California, Colorado, Connecticut, Delaware, Maryland, Massachusetts, Louisiana and Kentucky, apply the compulsory coverage requirement once you have a single employee, full-time or part-time. Part-timers, seasonal workers and often family members count.
A headcount threshold. Alabama (five), Georgia (three), Arkansas (three), Michigan (three, or fewer if one person works 35 hours a week for 13 weeks) and Florida (four) set a minimum number of employees before comp is compulsory, and then carve out construction or home building. Kansas uses payroll instead of headcount: Kansas requires coverage once total annual gross payroll exceeds $20,000 for non-agricultural employers.
Monopolistic state funds. North Dakota, Ohio, Washington and Wyoming do not allow private carriers to write comp for in-state workers. Employers buy from the state fund or qualify as self-insured where the state allows it. The NCCI's own experience rating publication lists these as the four monopolistic states, and the Washington Department of Enterprise Services and L&I confirm the exclusive fund model. Wyoming nuance: coverage is mandatory only for extra-hazardous employment listed in statute, and that coverage must come from the state fund, while employers outside those lists may elect state-fund coverage or seek a private carrier (Wyoming Legislative Service Office memo, June 2023). Details are in Monopolistic state funds: workers' comp in ND, OH, WA and WY. See North Dakota, Ohio, Washington and Wyoming. Employers' liability is not included in the fund policy and is bought as stop gap coverage (stop gap coverage in monopolistic states).
Optional coverage. Texas is the best-known state where most private employers can legally opt out of workers' comp, according to the Texas Department of Insurance research group. South Dakota is the other exception: its labor department says no state law requires employers to carry comp, though an uninsured employer can be sued by an injured worker (see South Dakota). TDI states that private employers may choose whether to carry comp, that governmental entities must have it, and that employers who opt out ("non-subscribers") must notify employees and the Texas Division of Workers' Compensation. The trade-off is covered in texas nonsubscribers: opting out of workers' comp and the state guide, Texas. A 2023 Wyoming legislative memo describes South Dakota, Texas and Wyoming as lacking a general mandate, so check any state not covered by a general mandate directly with its agency.
Quick reference: all 50 states and DC
The table comes from the finished state guides, which cite the statutes. "Private plus state fund" means a state fund competes with private carriers. Confirm with your state agency, since thresholds change by legislation.
| State | Threshold | Market | Owner and construction notes |
|---|---|---|---|
| Alabama | 5 (1 in new home building) | Private | Officers and LLC members may opt out by election |
| Alaska | 1 | Private | Owners with 10%+ exempt unless they elect; no reciprocity |
| Arizona | 1 | Private | Sole proprietors and partners covered only if carrier accepts; LLC members 50%+ may elect |
| Arkansas | 3 (fewer in construction) | Private | Two in building work; one if subcontracting |
| California | 1 | Private plus state fund | Concrete, HVAC, asbestos, roofing, tree service licensees must carry it with no employees |
| Colorado | 1 | Private plus state fund | 10% officers and LLC members may reject; construction proprietors cover or file rejection |
| Connecticut | 1 | Private | Officers, members and partners may elect exclusion; permits require proof |
| Delaware | 1 | Private | Up to eight officers or LLC members may be exempted |
| District of Columbia | 1 | Private | Sole proprietors exempt; contractors answer for uncovered subs |
| Florida | 4 (1 in construction) | Private | Up to three construction owners may exempt |
| Georgia | 3 | Private | Up to five officers may waive but still count toward three |
| Hawaii | 1 | Private | Owners with 50%+ outside the law |
| Idaho | 1 | Private plus state fund | Owners and 10% officers exempt but may elect |
| Illinois | 1 | Private | Owners covered only if they elect in; contractors answer for uninsured subs |
| Indiana | 1 | Private | Owners not employees unless they elect; construction proprietors need exemption certificate |
| Iowa | 1 | Private | Owners covered only if named on policy; up to four officers excludable |
| Kansas | $20,000 annual payroll | Private | Owners not covered unless policy includes them |
| Kentucky | 1 | Private plus state fund | Owners covered only by endorsement |
| Louisiana | 1 | Private plus state fund | 10% officers and LLC members may elect out |
| Maine | 1 | Private plus state fund | Officers with 20%+ may waive in writing |
| Maryland | 1 | Private plus state fund | Sole proprietors elect in; up to five officers exempt |
| Massachusetts | 1 | Private | Officers with 25%+ may waive with DIA |
| Michigan | 3 (1 if full-time 13 weeks) | Private | Sole proprietors not employees; partners and family excludable |
| Minnesota | 1 | Private | 25% officers and managers excludable |
| Mississippi | 5 | Private | Nonprofits, farm and domestic work outside the act |
| Missouri | 5 (1 in construction) | Private | LLC members and family presumed covered unless they opt out |
| Montana | 1 | Private plus state fund | Owners exempt, but must elect or hold certificate if working away from fixed site |
| Nebraska | 1 | Private | Owners elect in writing; 25% officers excluded unless they elect |
| Nevada | 1 | Private | Working owners elect in; principal is statutory employer of subs |
| New Hampshire | 1 | Private | Up to three executives or members excludable |
| New Jersey | 1 | Private | Owner-only businesses need not insure |
| New Mexico | 3 (1 in construction) | Private | Licensed construction employers regardless of size |
| New York | 1 | Private plus state fund | Two-person officer-owned corporations exempt; construction presumption |
| North Carolina | 3 (1 with radiation exposure) | Private | Owners elect in; officers may be excluded |
| North Dakota | 1 | Monopolistic fund (WSI) | Officers and owners elective; no self-insurance |
| Ohio | 1 | Monopolistic fund (BWC) | Self-insurance allowed; owners elect in |
| Oklahoma | 1 | Private | Owners and 10% members elect in |
| Oregon | 1 | Private plus state fund | Owners nonsubject; construction partners subject |
| Pennsylvania | 1 | Private plus state fund | Owners covered only by voluntary election |
| Rhode Island | 1 | Private | Owners not employees unless under contract of service |
| South Carolina | 4 | Private | Casual and agricultural employees excluded |
| South Dakota | Optional | Private | No law requires comp; uninsured employer may be sued |
| Tennessee | 5 (1 in construction, coal mining) | Private | Construction owners covered unless exemption registered |
| Texas | Optional | Private plus state fund | Nonsubscribers file DWC-005 yearly and lose defenses |
| Utah | 1 | Private | $50 one-year waiver for owners with no employees |
| Vermont | 1 | Private | Corporations and LLCs may exclude up to four |
| Virginia | 3 (subcontractors' workers count) | Private | No waiver forms; owners elect in |
| Washington | 1 | Monopolistic fund (L&I) | Hourly premiums; owners elect in |
| West Virginia | 1 | Private | Owners and officers excludable |
| Wisconsin | 3 (1 if $500 a quarter) | Private | Owners excluded unless policy endorsed |
| Wyoming | 1 (extra-hazardous work only) | Monopolistic fund | Fund required for listed work; otherwise private allowed |
Owners, officers and family
Whether an owner must be covered is its own question. California lets certain officers and directors who own at least 10% of the stock (or 1% if a close relative owns 10%), plus general partners and LLC managing members, opt out with a written waiver; Florida counts corporate officers and LLC members as employees unless they file an exemption, and limits construction exemptions to three owners; Illinois covers sole proprietors, partners and LLC members only if they elect in, while bona fide corporate officers may withdraw by written notice to the carrier. These differences matter at audit, because an insurer may charge premium on an owner's payroll unless the exemption is properly filed. See can owners and officers exclude themselves from workers' comp?.
What happens if you go uninsured
Penalties are state-specific and generally severe:
- Stop-work orders. Florida's stop-work order carries a penalty of twice the premium you should have paid over the prior 12 months or $1,000, whichever is greater, and $1,000 a day for working under a stop-work order.
- Fines and jail. California treats it as a misdemeanor with a fine of up to double the premium, at least $10,000. Alaska allows civil penalties up to $1,000 per employee per uninsured day. Iowa and Illinois can treat willful failure as a felony.
- Personal liability. Maryland, Minnesota and the District of Columbia reach managing officers or owners personally.
- Loss of defenses. Several states, including Iowa, Michigan and Delaware, let an injured worker sue an uninsured employer in court and strip the usual common-law defenses.
- Uninsured subcontractors. Florida, Illinois and Delaware make a contractor who hires an uninsured subcontractor liable for the sub's employees.
A short checklist for a multistate employer
- List every state where an employee regularly works, travels or is hired.
- Identify which of those states are monopolistic; each needs its own fund account.
- Confirm Item 3.A of the policy lists the states of regular operations and Item 3.C covers incidental exposure (employees in several states: other-states coverage and multistate workers' comp).
- Check each state's treatment of owners and contractors.
- Add stop-gap employers' liability for any monopolistic state.
- Revisit annually, since remote work and new hires move you into new states (remote employees and workers' comp: coverage, claims and state rules).
Key takeaways
- One employee triggers comp in most states, but Alabama, Georgia, Arkansas, Michigan, Florida and Kansas use higher or different tests.
- North Dakota, Ohio, Washington and Wyoming are monopolistic; Wyoming only mandates coverage for extra-hazardous work listed in statute.
- Texas lets most private employers opt out, with notice requirements and loss of common-law defenses as the trade-off; South Dakota's labor department says no law there requires comp.
- Penalties range from stop-work orders to felonies and personal liability for owners.
- Always confirm the current rule with your state's workers' comp agency or the workers' comp and benefits requirements by state.