Workers' Compensation Exemption -  how to apply for it

Workers' Compensation Exemption

In many states of USA, the law forces companies to purchase the worker compensation insurance in case any labor might get ill or injured during the job. This guide will help you to understand who are exempted from availing worker compensation and how to apply for it.

Workers have the right to sue their employer if they do not provide them with the compensation benefits facility in case of the accident or sickness caused while performing workplace responsibilities. However, under some conditions states permit exemption from the worker compensation to individuals like independent contractors, casual labor etc. and few small scale firms.

Casual Labor Exemption from Worker Compensation Benefits

Workers enrolled as casual labor are not “employees”. This aspect makes them unprotected in the eyes of law. Worker compensation policy does not provide any benefit to these labors in case of getting injured/ill due to any job task. This exemption is applicable in almost every USA state with different requirements, as every state has its own definition of casual labor.

Normally casual labor can be referred to as the labors that do not do normal course work such as trade, business or any other professional task for the employer. A company hiring a landscaping firm to protect the grounds is an example of casual labor. Moreover, any company hiring a carpenter to upgrade its office also comes in this type. This is because the work is not directly related to business goals. Thus, casual labor is someone who is not linked with promoting or advancing the company's processes or business.

Exemption of Independent Contractors from Payment Law

In many states, there are rules which exempt certain employees from getting the workers' compensation insurance. Independent contractors are the most common type of workers that do not come in compensation law. This is because the independent contractors are self-governing workers and thus cannot be titled as employees. Self-owner means that they are responsible for themselves and does not need any payment for injury or illness caused at the office.

In a few states, it is necessary for the independent workers to clearly tell the government that they are "free from control" in regard to specific works. Doing that will exempt them from worker compensation and thus the company would not provide any payment to these sovereign workers.

Commissioned Real Estate Agents

Several states have removed the necessity of providing the workers' compensation right to real estate agents or any other subagents who get their income from commission. However, exclusion of real estate agents from compensation benefits is not applied in each state. People belonging to this profession must see the worker compensation rules of their state.

Apart from that, there are some other people or workers that do not be given any treatment for the on-job injury or illness. These changes with states, but most of them are common. Following are the workers that do not come under compensation benefits:

  • Volunteers for ski patrol operator.
  • Expert athletes.
  • Officials of the athletic contest.
  • Members of the ministry.
  • Musicians/performers
  • Specific taxicab drivers.
  • Direct sale people (i.e. consultants and directors).
  • Officers belonging to non-profit firms and corporations.
  • Newspaper re-sellers.

Does Your Small Business Qualify as Exempt?

Few USA states have exempted Limited Liability Company (LLC) owners, sole proprietors, and people in partnerships from giving the worker's compensation payments to their employees. In this perspective, the US Department of Labor has prepared a list of all offices that are exempted from proving reimbursement benefits. The list is developed to clearly recognize which of the enterprises that belong to such categories comes under the umbrella of workers' compensation exemption.

Firms fitting into this criterion can find information from the USA department of labor website. If their names are mentioned in the list, then the companies can be exempted from giving the compensation benefits to any staff member in case he/she gets ill or injured due to work activity. Specifically, this kind of exclusion is common in the USA construction industry. This relaxation can be helpful in reducing the financial burden on individual owners.

Other Cases Where Workers' Compensation Exemption is Applicable

In some situations, the employees are excluded from getting workers' compensation benefits. These situations vary from nation-to-nation or even at the state level. Most of them are linked to workers' own mistakes. The most general situations in which compensation is not granted include:

  • The injury caused by the worker's own fault.
  • A fight with a fellow employee resulted in getting injured.
  • Getting injured because of going against the company's policies.
  • The injury caused when not doing work.
  • Breaking law resulted in getting harmed.
  • The injury caused by the worker mental health problems (a solid proof is required in this case).

Thus, in any of these situations, the person being an employee of any company will be not given compensation benefits. Almost each of this injury is caused by the worker's own mistake and hence does not need to be paid to get medicine or treatment. Firms must include this exception in their labor policies.

Workers' Compensation Coverage for Exempted labors

The workers' compensation coverage can be stretched to most of the workers that are exempted from getting paid in case of work-related injury or illness. This can be possible if the workers link themselves to any of the “Voluntary Compensation Endorsements”. These endorsements help the workers that are being exempted by individual state law to gain compensation benefits.

In this case, the firm will be given the right to protect any of the workers by giving them basic compensation rights. Thus, in this scenario, workers are now given a name of “defacto employees”. In relation to that, private workers who are granted with compensation benefits must keenly look into the below worker compensation cost based on the sector they serve.

Figure 1: Private firms cost per hour served for workers' compensation insurance

Procedure to be followed by Workers while Applying for the Exemption

There exists a great difference between states related to filing the workers' compensation exemption. This is because each state has created their own procedures that relate to laws. For instance, exemption application in Florida starts by asking the worker about their category of exemption i.e. either they work in a construction or non-construction sector. This is further followed by asking them whether they belong from the corporation or are an owner/member of an LLC.

After that, there is a requirement for the business document number. The application also seeks out for the scope of the firm's business in which labor works. Upon completion of this long procedure, the “Certificate for Exemption” will be provided to the worker. Receiving the certification of exemption means the worker will no longer get benefits of compensation.


The worker compensation is an important aspect for an employee, but in some instances, the certain workers are being exempted from getting this protection right. Normally casual labors that are not directly linked to firm's goals are being exempted from getting the worker compensation right. The basic example of this is the carpenter hired for renovating or upgrading the office. Apart from that, independent workers who are known as self-owners are exempted from this right. Real estate agents also come in this exemption category.

On the other hand, there are few workers such as volunteer for ski-patrol, sole business owners, musicians and other discussed groups that are not eligible for getting the fundamental compensation insurance. Moreover, exempted labors have also an opportunity to apply for worker compensation. Linking themselves with the various compensation endorsements can assist them in achieving this motive. In contrast, the eligible employees can exclude themselves from the worker compensation benefits if they wish to. They only need to follow the exemption certificate process of their state to get exempted with this right. - Shayyan  - author / writer

Shayyan has completed his master in Law from University of Melbourne along with a year of experience as a law professor in Melbourne. He is very opinionated and believes in the saying that a pen is mightier than a sword. Since his early life, he has served greatly to make the world a better place by writing worthy articles regarding political, legal, and social problems. During his leisure time, he loves to travel and learn about new cultures, languages and societies - logo

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