Buying a workers' comp policy in Minnesota is a relatively easy type of insurance policy to buy.
Even new employers without experience can get a policy because if an employer is turned down from the voluntary workers comp insurance market, Minnesota has an assigned risk program for workers compensation. 1 Reason Insurance can help your business buy a workers' compensation insurance policy regardless if it's in the voluntary market or in the assigned risk program.
As a quick primer… According to the Minnesota Department of Labor and Industry, Minnesota Statutes, section 176.181, subdivision 2 regulates workers' compensation. In a nutshell, if your business has or will have employees, you should consider workers' comp a legal requirement unless the employees are within an exception. The Department of Labor and Industry have a helpful factsheet that's included as a download for you. Because rules and laws change, you won't want to depend on what's written here as your business' sole information. Feel free to give us a call and we'll be happy to discuss your requirements.
From the fact sheet on Minnesota Workers' Compensation Insurance For Employers …
"Every employer, except the state and its municipal subdivisions, is required to have workers’ compensation insurance through an insurance carrier licensed in Minnesota or obtain a written order from the commissioner of the Minnesota Department of Commerce permitting the employer to self insure for workers’ compensation liability – see www.revisor.mn.gov/statutes/?id=176.181."
If you're required to provide workers compensation insurance for your employees, you may be subject to civil and criminal penalties. "The consequences for employers, including corporate owners or officers, that fail to obtain workers’ compensation insurance coverage for their employees include civil penalties and liability for the workers’ compensation benefits and medical treatment for employees injured on the job. additionally,
an employer that willfully and intentionally fails to obtain workers’ compensation coverage is guilty of a gross misdemeanor."
While there are other exceptions, for most Minnesota employers, these are the most common exceptions, as in the following employees don't necessarily need to be included for coverage by law. I often have a conversation with employers on who they need to cover and who they don't. One thing I always tell business owners is that if you don't include family members and you also don't provide disability income insurance, you're setting yourself up to ruin every holiday you will ever have again. I'll explain in a moment, albeit first, let's examine the exceptions from 176.041 (keep in mind, the rules can change at any time)….
The missing numbers are from me filtering for the most applicable exceptions…
176.041 EXCLUDED EMPLOYMENTS; APPLICATION, EXCEPTIONS, ELECTION OF COVERAGE.
§Subdivision 1.Employments excluded. This chapter does not apply to any of the following:
(2) a person employed by a family farm as defined by section 176.011, subdivision 11a;
(3) the spouse, parent, and child, regardless of age, of a farmer-employer working for the farmer-employer;
(4) a sole proprietor, or the spouse, parent, and child, regardless of age, of a sole proprietor;
(5) a partner engaged in a farm operation or a partner engaged in a business and the spouse, parent, and child, regardless of age, of a partner in the farm operation or business;
(6) an executive officer of a family farm corporation;
(7) an executive officer of a closely held corporation having less than 22,880 hours of payroll in the preceding calendar year, if that executive officer owns at least 25 percent of the stock of the corporation;
(8) a spouse, parent, or child, regardless of age, of an executive officer of a family farm corporation as defined in section 500.24, subdivision 2, and employed by that family farm corporation;
(9) a spouse, parent, or child, regardless of age, of an executive officer of a closely held corporation who is referred to in clause (7);
(10) another farmer or a member of the other farmer's family exchanging work with the farmer-employer or family farm corporation operator in the same community;
(11) a person whose employment at the time of the injury is casual and not in the usual course of the trade, business, profession, or occupation of the employer;
(12) persons who are independent contractors as defined by sections 176.043 and 181.723, and any rules adopted by the commissioner pursuant to section 176.83 except that these exclusions do not apply to an employee of an independent contractor;
(14) a person employed as a household worker in, for, or about a private home or household who earns less than $1,000 in cash in a three-month period from a single private home or household provided that a household worker who has earned $1,000 or more from the household worker's present employer in a three-month period within the previous year is covered by this chapter regardless of whether or not the household worker has earned $1,000 in the present quarter; (think Nanny here)
(15) persons employed by a closely held corporation who are related by blood or marriage, within the third degree of kindred according to the rules of civil law, to an officer of the corporation, who is referred to in clause (7), if the corporation files a written election with the commissioner to exclude such individuals. A written election is not required for a person who is otherwise excluded from this chapter by this section;
(16) a nonprofit association which does not pay more than $1,000 in salary or wages in a year;
(17) persons covered under the Domestic Volunteer Service Act of 1973, as amended, United States Code, title 42, sections 5011, et seq.;
(18) a manager of a limited liability company having ten or fewer members and having less than 22,880 hours of payroll in the preceding calendar year, if that manager owns at least a 25 percent membership interest in the limited liability company;
(19) a spouse, parent, or child, regardless of age, of a manager of a limited liability company described in clause (18);
(20) persons employed by a limited liability company having ten or fewer members and having less than 22,880 hours of payroll in the preceding calendar year who are related by blood or marriage, within the third degree of kindred according to the rules of civil law, to a manager of a limited liability company described in clause (18), if the company files a written election with the commissioner to exclude these persons. A written election is not required for a person who is otherwise excluded from this chapter by this section; or
(21) members of limited liability companies who satisfy the requirements of clause (12).
Again, moving back to why you will likely want to provide workers' comp coverage (or an appropriate disability income insurance policy). Imagine your child delivering food for your restaurant and gets into a car crash leaving your employee/child paralyzed for life. Without workers comp or some other type of insurance coverage, your loved one will be left more or less on their own. If you believe you're safe because you don't deliver products, you may wish to re-think your exposure. The same risk remains regardless if you're delivering products if you send employees on the road to get things (happens a lot for most companies).
Does that mean I think you as a business should cover every employee if you're not legally required to? No, not always, and in fact, most of the time, it makes sense to use another insurance product to provide coverage. Some people may not even be employees, albeit often business owners classify employees as subcontractors and not employees. Here's a link that discusses some of the key rules in determining if someone is a subcontractor or employee.
If you're brand new and looking to hire your first employee, don't forget you'll want to perform other administrative tasks including: