Do I Need Workers' Comp Insurance? State Rules

Workers’ comp is a state program

Workers' compensation pays an employee's medical care and part of their lost wages after a work-related injury or illness. In return, the employee generally cannot sue the employer over the injury. There is no single federal workers' comp law for private businesses. The U.S. Department of Labor's Office of Workers' Compensation Programs runs programs only for specific groups (federal employees, longshore and harbor workers, coal miners, and nuclear weapons workers) and points everyone else to their state's program.

So the real questions are state questions: which state your employees work in, how many people you employ there, and how that state lets you buy coverage. The rules below are for the ten states where most small US tech companies hire.

Who must carry coverage, state by state

Workers' compensation requirements in ten states
State	Who must carry it	How you get coverage
California	Every employer with one or more employees, including family members who help in the business.	A licensed insurance company or the State Compensation Insurance Fund (State Fund). Self-insurance is an option with state approval.
New York	Virtually all employers. Part-time, temporary, seasonal, leased and unpaid workers count, as do family members and volunteers at a for-profit business.	A private insurance carrier, the New York State Insurance Fund (NYSIF), or approved self-insurance.
Texas	Not required for most private employers.	Buy a policy, or opt out as a "non-subscriber" and meet the state notice and reporting duties (see below).
Washington	Mandatory for every worker who does not fall under a specific exclusion.	Only through the state fund run by the Department of Labor & Industries (L&I), or certified self-insurance (generally companies with at least $25 million in assets). Private workers’ comp insurance is not allowed.
Massachusetts	All employers, no matter how many employees or how many hours they work. Domestic workers are covered once they work at least 16 hours a week.	A private insurer, through an agent or broker. If two insurers turn you down, the state assigned risk pool. Self-insurance only for large employers.
Colorado	Every employer with one or more employees, whether part-time, full-time or family members.	A commercial insurance carrier or self-insurance. Pinnacol Assurance is required to offer coverage to any Colorado employer.
Illinois	Employers of nearly everyone hired, injured, or whose job is based in Illinois. Coverage starts on the first day of work.	A workers’ comp insurance policy, or permission to self-insure from the Illinois Workers’ Compensation Commission.
Florida	Non-construction businesses with 4 or more employees, construction businesses with 1 or more, and farms with 6 regular or 12 seasonal workers. Corporate officers and LLC members count toward the total.	A Florida policy from a Florida-approved insurer. Eligible business owners can file for an exemption for themselves.
New Jersey	Every business where at least one person works for pay. Corporate officers count; partners, LLC members and sole owners do not.	A policy from an insurer authorized in New Jersey, or self-insurance approved by the state.
Georgia	Businesses that regularly employ 3 or more people, counting regular part-time and seasonal workers.	A private insurance carrier, or self-insurance with state approval (available to large employers).

Owners are treated differently from state to state. Sole proprietors, partners and LLC members are often not required to cover themselves, and some states let corporate officers opt out. Your employees still have to be covered either way.

Texas: what opting out actually involves

Texas is the main state where a private employer can legally go without workers’ comp. Employers that do are called non-subscribers, and opting out is not the same as doing nothing. The Texas Department of Insurance, Division of Workers’ Compensation, lists these duties:

File a notice of no coverage with the state each year, between February 1 and April 30.
Post a notice of no coverage in the workplace.
Give written notice of no coverage to each new employee.
If you have five or more employees, report work-related injuries and illnesses that cause more than one day of lost time, and deaths. Reports are due within one month and seven days.

Opting out is a business decision with real trade-offs, so talk it through with your insurance broker first. If you have people in Texas and in other states, the other states’ rules still apply to the people who work there.

Remote employees and teams in more than one state

Coverage generally follows where the employee is based, not where the company is incorporated. Washington, for example, decides employee by employee and looks at the state each person is based in. If any employee is based in Washington, you need a Washington workers’ comp account, even if your company is somewhere else. New Jersey says out-of-state employers may need New Jersey coverage when work is performed in New Jersey. Florida requires an out-of-state employer to have a Florida policy that lists Florida on it.

Before a remote hire starts, tell your insurer which state they will work from and confirm the policy covers that state. In Washington, the only route is an L&I account.
When an existing employee moves, treat it like a new-state hire. The old state’s coverage may not follow them.
Short trips into another state are handled differently from being based there. Some states have agreements with each other for temporary work, so check before assuming you need a second policy.

Workers’ comp is one of several registrations a new state brings. The rest are covered in hiring employees in another state.

What happens if you are not covered

Going uninsured where coverage is required is expensive even when nobody gets hurt. A few examples from the state agencies:

California: the Labor Commissioner issues a stop order barring the use of employee labor until you buy coverage, plus a penalty of twice the premium you would have paid or $1,500 per employee, whichever is greater.
New Jersey: failing to insure is a disorderly persons offense (a crime of the fourth degree if willful), with penalties of up to $5,000 for the first ten days and up to $5,000 for each ten days after that. Corporate officers can be personally liable.
Illinois: daily criminal penalties, a civil penalty of $500 for each uninsured day (minimum $10,000), and a possible stop-work order. An injured employee can also sue the employer in civil court.

Common mistakes

Assuming part-time or family workers do not count. In most of the states above, they do.
Calling someone a contractor to avoid covering them. If the person is really an employee, the coverage duty applies. See contractor vs. employee.
Hiring a remote employee in a new state without adding that state to the policy.
Deducting the premium from pay. Illinois says no part of the premium can be charged to the employee. Washington is unusual: employers may withhold a limited share of certain L&I premiums, capped at the rate on the employer’s rate notice.
Confusing workers’ comp with general liability insurance. Massachusetts points out that they are not the same thing.

Common questions

Do I need workers' comp for just one part-time employee?

In California, New York, Washington, Massachusetts, Colorado, Illinois and New Jersey, yes. Georgia starts at 3 regular employees, Florida at 4 outside construction, and Texas does not require it for most private employers.

Do I need workers' comp for independent contractors?

Generally no, for people who are truly independent contractors. If a worker is actually an employee under state law, though, you need to cover them, and some states (such as Washington) also look at certain contractors.

Is workers' compensation a federal requirement?

No. Private-sector workers’ comp is set by each state. The federal Office of Workers’ Compensation Programs covers only federal employees and a few specific groups of workers.

Can I buy workers' comp from any insurer?

In most states you can use a private insurer, and many states also have a state fund. Washington is different: coverage must come from the state fund run by L&I unless you are a certified self-insured employer.

Sources

Last reviewed October 2, 2026. This page is general information, not legal advice. Laws change and exceptions apply, so check the sources above or an employment lawyer before you act on a specific case.