Illinois has a long history of requiring workers’ compensation by its employers. Since 1912, when the first worker’s compensation insurance law took effect, employers were required to get coverage. In part, the law was in response to the 1909 Cherry Mine Disaster.*
Illinois requires most employers to get insurance to cover their employees. Some businesses (mostly larger, well-funded employers) may self-insure, albeit I’ll focus this article on the smaller companies looking to hire their first employee, or wanting more information on what’s required. Workers’ compensation is designed to cover work-related injuries regardless of who is at fault. There are situations that employees or employers can do to impact if the insurance policy will pay out or not, but that’s beyond the scope of this article.
Who doesn’t need workers’ compensation in Illinois? Sole proprietors, business partners, corporate officers, and members of a limited liability company usually are allowed to exempt themselves. These small businesses often comprise of small service based businesses that only have the owner as the one and only employee.
Because workers’ compensation isn’t a good value for most people, owners and others who can, usually will waive out of workers’ compensation insurance and instead purchase health insurance (if they don’t already have it), and disability income insurance to cover in case of a work (or non-work) related injury.
The best part about disability income insurance is that if a person qualifies (which is tough in some occupations if the individual has been injured previously) is that normally, it’s lower cost and better coverage than workers’ comp, at least from the income replacement point of view.
According to the Illinois Workers’ compensation commission, over 90% of illinois employees are covered under the workers’ compensation insurance act.
Some states offer a period between the time an employee is hired and when workers’ comp coverage must begin. For example, in Wisconsin, workers’ comp isn’t always required for a new employer the day their first employee starts work. In Wisconsin, it’s based on payroll. However, in Illinois, any employee, even part-time employees (including one employee operations) trigger the requirement and employers should have their workers’ compensation insurance policy at the time of hire.
The fines are serious and any employer that knowingly and willfully fails to obtain insurance may be fined up to $500 for every day of noncompliance, with a minimum fine of $10,000 according to the commission. Also, corporate officers can be held personally liable if the company fails to pay the penalty. The commission isn’t afraid to demand fines from employers and has collected over $7 million in fines from businesses from 2006 until the time of writing in 2018.
Unlike Minnesota that allows for many family members to be excluded, Illinois (and Wisconsin) require most family members to be insured. Exceptions include corporate officers, or many workers within the agricultural industry.
Illinois uses a two-tiered system, as most states do for workers’ compensation pricing. The first, is the free-market where insurance companies compete for your business. The second is the “market of last resort” or what I call the assigned risk “pool” that is operated (or administered) by the National Council of Compensation Insurance.
Pool policies generally cost more than what the open “voluntary” market charges, so it’s important to have a plan in place to move your workers’ compensation insurance from the Pool to the voluntary market at the optimal time. I can help you create a strategy that will minimize your expenses while remaining within the law.
It’s important to note that workers’ comp doesn’t just cover injuries at work. It also covers diseases that may occur.
If you want to get a competitive analysis of your company’s workers’ compensation, feel free to reach out by email or call. We also have a form that you can fill out and have me call you back. Regardless if your business has employees in the voluntary market, or Pool, it’s worth your time to talk with someone who focuses on business insurance.
- On around November 13, 1909, the Illinois Cherry Coal Mine disaster took place. It was a coal mine opened in 1905, and located in northern Illinois near the middle from east and west. By 1909, over 500 people (men and boys) worked the mine. Boys as young as 11 years old worked at the mine.
When kerosene lanterns and torches were used instead of the electric lights (due to an electrical outage), it created a situation that allowed hay for mules to catch on fire. Furthering the problem was little or no efforts initially to put out the fire or to halt the work production.
Workers weren’t paid by the hour, they were paid by the amount of production, which appears to have caused a desire to ignore safety on some levels so that the amount of pay wouldn’t be reduced by issues of a fire in the coal mine (hard and sad to imagine by today’s standards).
Over 250 men out of the 500 working died as a result of the occurrence.
Within three years after the disaster, the state passed what was the beginning of workers’ compensation legislation that we now have today.