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How Workers’ Comp Works for Multi-state Businesses

3 min read

Workers’ compensation laws can be extremely confusing, mainly because they are set by individual states instead of on the federal level. If you own a business with locations in multiple states, you have to be aware of the laws in each of those states.

The hardest thing for most business owners to figure out is jurisdiction. If you have a business with locations or job sites in multiple states and one of your employees is injured, which state laws apply?

Unfortunately, there is no clear-cut answer to this question. Again, each state has different laws, and it will also depend on which states are listed as the “primary state” vs. “other states” of operation on the insurance policy. To clear up any confusion, you can read more about workers’ comp jurisdiction and talk to your legal counsel.

Know Your Needs

There are a few things you need to know about your business to ensure you have the right coverage for each state you have a location in:

  • First, how many employees do you have working in each state? Many states have specific guidelines for the type or amount of coverage based on the number of employees on a policy. The number of employees your business has will also affect your insurance rates.
  • Next, you’ll need to know the type of employees you have. For example, do you primarily use independent contractors for your business or have any volunteers? Be aware of how each state in which you operate categorizes employees.
  • Finally, you will need your industry classification code for each state in which you have workers. Though many states use the codes created by the National Council on Compensation Insurance, other states have their own unique systems.

Know the Relevant State Laws

Different states have different rules and regulations surrounding workers’ comp insurance. For example, the minimum coverage required by a state can vary drastically. Also, exemptions are different from state to state. For example, some states allow you not to have workers’ comp for independent contractors while others require it. Thus, it’s important to know where all the states in which you operate stand.

It’s also crucial to know what type of state fund for compensation insurance that each state you operate in has.

States with monopolistic funds include North Dakota, Ohio, Washington, and Wyoming. In these states, there is only one option for your workers’ comp insurance, and that is through the state fund. In these states, you cannot shop around for rates; you simply have to pay the rate determined by the state fund. Typically, you can’t use that insurance for out-of-state employees and have to find a separate plan for them.

On the other hand, if a state has a competitive state fund, employers can choose between using that fund and purchasing coverage from a private insurance company. In such states, employers have the option to shop around and find the best rates.

Know Your Provider and Policy Options

Based on your specific circumstances, you may have a couple of options for providing workers’ comp insurance for all of your employees:

  • You can purchase separate plans for each state in which you operate. (Depending on which particular states you work in, this may be your only option.)
  • If the requirements of each state you operate in are similar enough, you can consider a national or regional insurance provider. These providers can write multi-state policies that cover all of your employees.

Research and Relax

Navigating workers’ comp insurance can be daunting, even when you only have one set of state laws to contend. It can seem like a monumental task to navigate several states’ laws when you are expanding or opening your business. However, a little research into each relevant state’s specific laws and limitations will give you everything you need to know.

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