Do Massachusetts Small Businesses Need Workers’ Compensation Insurance?
If you own a small business in Massachusetts and have employees, there is a very good chance you are legally required to carry workers’ compensation insurance.
In fact, Massachusetts has relatively broad workers’ compensation requirements. The rule generally applies whether you employ one person or dozens and whether your employees work full time or only a few hours each week.
Understanding these requirements is important for new businesses, growing companies, and established employers adding their first employee.
If you are reviewing coverage for your company, Banas & Fickert Insurance Agency can help you workers’ compensation insurance in Massachusetts.
Is Workers’ Compensation Insurance Required in Massachusetts?
Generally, yes.
The Massachusetts Department of Industrial Accidents states that employers operating in Massachusetts must carry workers’ compensation insurance for their employees. The requirement applies regardless of the number of employees or the number of hours they work, with limited exceptions.
Business owners can review the state’s official Massachusetts workers’ compensation insurance requirements for detailed information about who must have coverage and which exemptions may apply.
This means a small business does not become exempt simply because it has only one employee.
For example, a Massachusetts landscaping company with one employee, a retail store with two part-time workers, or a small professional office with several employees will generally need workers’ compensation coverage.
What If My Employees Are Part Time?
Part-time status generally does not eliminate the requirement.
Massachusetts says the requirement applies regardless of the number of hours employees work. The primary hours-based exception identified by the state involves domestic service employees, who generally must work at least 16 hours per week before workers’ compensation coverage is required.
Small business owners should therefore avoid assuming that part-time, seasonal, or occasional employees automatically fall outside workers’ compensation requirements.
How a worker is classified can also matter. Massachusetts provides additional guidance explaining who is covered by workers’ compensation insurance, including information about employees, subcontractors, and independent contractors.
Do Sole Proprietors Need Workers’ Compensation Insurance?
The answer depends on whether the business has employees.
A sole proprietor who does not have employees generally is not required to purchase workers’ compensation coverage for themselves. Similarly, members of an LLC and partners in certain partnerships may not be required to cover themselves.
However, that exemption does not automatically extend to employees working for the business. If the company hires employees, those employees generally must be covered.
Some owners may also choose to obtain coverage for themselves even when it is not legally required.
Because ownership structure can affect workers’ compensation requirements, it is worth reviewing your specific business with an insurance professional rather than relying solely on the size of the company.
Can Corporate Officers Be Exempt?
Some corporate officers may qualify for an exemption.
According to the Massachusetts Department of Industrial Accidents, corporate officers who own at least a 25% interest in the corporation may request an exemption from workers’ compensation coverage for themselves. Employees who do not qualify for an exemption must still be covered.
The exemption is not automatic, so business owners should review the applicable state requirements before removing an owner or officer from a policy.
What Does Workers’ Compensation Insurance Cover?
Workers’ compensation is intended to help employees who experience qualifying work-related injuries or illnesses.
Massachusetts explains that workers’ compensation benefits may include medical care, compensation for lost wages, vocational rehabilitation in qualifying cases, and benefits related to disability or death.
For employers, coverage can apply to situations such as an employee who:
- falls and is injured while performing job duties;
- hurts their back while lifting materials;
- is injured while using tools or equipment;
- develops a qualifying occupational illness; or
- suffers another covered injury arising out of their employment.
Business owners who want more detail can review the state’s explanation of Massachusetts workers’ compensation benefits.
The exact benefits available depend on the circumstances of the claim and Massachusetts workers’ compensation law.
Workers’ Compensation Is Not the Same as General Liability Insurance
One common mistake among small business owners is assuming general liability insurance covers employee injuries.
These policies serve different purposes.
Workers’ compensation generally addresses qualifying injuries and illnesses involving employees. General liability insurance is generally designed for claims such as bodily injury or property damage involving customers, visitors, or other third parties.
The Massachusetts Department of Industrial Accidents specifically notes that workers’ compensation and liability insurance are not the same thing.
For example, if an employee falls from a ladder while working, that may involve workers’ compensation. If a customer trips over equipment your company left on the floor, that may instead involve general liability coverage.
Banas & Fickert provides additional information about commercial general liability insurance for Massachusetts businesses.
Many businesses need both types of coverage.
What Happens If a Massachusetts Business Does Not Carry Workers’ Compensation Insurance?
Operating without required workers’ compensation coverage can become expensive very quickly.
The Massachusetts Department of Industrial Accidents can issue a Stop Work Order to an employer that does not have required coverage. The state says minimum fines can begin at $100 per day—including weekends and holidays—from the date the order is issued and continue until coverage is obtained and applicable fines are paid. Additional consequences can apply depending on the circumstances.
Businesses can review the state’s complete workers’ compensation compliance requirements and penalties directly through the Department of Industrial Accidents.
For a small business, these penalties can be significantly more costly than maintaining appropriate insurance from the beginning.
How Much Does Workers’ Compensation Insurance Cost in Massachusetts?
There is no single price for every Massachusetts business.
Workers’ compensation premiums can vary based on factors such as the type of work employees perform, payroll, employee classifications, claims experience, and other underwriting considerations.
A construction contractor, for example, has different workplace risks than an accounting office. Because of those differences, the two businesses should not expect identical workers’ compensation rates even if their payrolls are similar.
Massachusetts uses job classification codes as part of the workers’ compensation system. Business owners interested in classifications can also use the Workers’ Compensation Rating and Inspection Bureau of Massachusetts class code lookup.
Correct employee classifications are important. A business should accurately describe what employees actually do rather than choosing a classification solely because it appears less expensive.
What Other Insurance Should a Massachusetts Small Business Consider?
Workers’ compensation is only one part of protecting a business.
Depending on the company, appropriate coverage may also include general liability insurance, commercial property insurance, commercial auto insurance, professional liability insurance, an umbrella policy, inland marine coverage, or a Business Owner’s Policy.
The right combination depends on the company’s industry, employees, property, vehicles, contracts, customers, and overall risk exposure.
When Should a New Business Buy Workers’ Compensation Insurance?
Ideally, businesses should address workers’ compensation requirements before the first employee begins working.
Waiting until after an employee is hired can create a period in which the company is operating without required coverage.
Massachusetts advises employers seeking coverage to contact an insurance agent, broker, or insurance company. The state also explains additional options for businesses that have difficulty obtaining coverage in the voluntary insurance market.
You can review the state’s official guidance on how to obtain workers’ compensation insurance in Massachusetts.
Workers’ Compensation Insurance for Small Businesses in Western Massachusetts
Workers’ compensation requirements can seem complicated, particularly when a company is hiring its first employee, using seasonal workers, expanding into Massachusetts, or determining whether owners should be included in a policy.
Banas & Fickert Insurance Agency is based in Easthampton and works with businesses throughout Massachusetts to review workers’ compensation and other commercial insurance needs.
If your company is hiring employees or reviewing an existing policy, learn more about Massachusetts workers’ compensation insurance
You can also explore Banas & Fickert’s business insurance options for Massachusetts companies to see how workers’ compensation can fit into a broader commercial insurance program.
Insurance policies, eligibility, exemptions, benefits, and requirements vary. This article provides general information and is not legal advice. Business owners should review current Massachusetts requirements and their individual policy documents.
Banas & Fickert Insurance Agency
