Can Business Owners Be Excluded From Workers Compensation Coverage

Certain business owners may elect to exclude themselves from workers' compensation insurance coverage. This applies to officers of a closely held corporation, general partners, and member-managers of limited liability companies. Sole proprietors are always excluded. 

LLC Members and Partners are automatically excluded from the workers compensation coverage, but by written request may elect to be included.Generally, three types of owners will be eligible to elect exclusion:

• Manager-members of a business operating as a limited liability company

• Stockholding officers and directors of a corporation owned 100 percent by its officers or directors,

• General partners or share holding officers of a corporation operating as a general partner (in which case the officers must be the sole shareholders of the corporation) of a business operating as a partnership.

In each of these cases the exclusion must be elected and is not automatic.

If included for coverage these owners are subject to the payroll maximum and minimum rating rules. 

If election is not made and updated properly, it can be costly. 

The Division of Labor Standards Enforcement will issue and serve a stop order and penalty assessment prohibiting further use of employee labor until Workers’ Compensation Insurance is purchased.  The Workers’ Compensation – Audit and Enforcement Unit may charge penalties and issue an order for unpaid compensation to be paid.Please consult with us if you have any questions regarding your workers compensation coverage.