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Workers Comp Requirement Trap – Maximum Conundrum


Workers Comp Requirement – Do Not Go There

Earlier this week, in a previous article, I had promised that I would cover the question – how many employees can my company hire without having to buy a workers comp policy?  The first part of the answer is to not place the business in a workers comp requirement trap.  Let us cover how to avoid the very expensive trap.

The National Federation of Independent Businesses (NFIB) has a listing that should help. Check the link.  The slider at the top right of the chart page provides quick access to any state.

A very quick review showed that Mississippi requires workers comp coverage with five or more employees.  The Magnolia State seems to allow the most employees without Workers Comp coverage in the nation.

Each state listed on the NFIB page has many exceptions.  Many states require coverage if there are ANY employees.  Please do read each state that you are looking to entrepreneur a start-up.   They do vary somewhat.

Astounding Census Bureau Numbers

Many new businesses have been started post-pandemic. The US Census Bureau tallied  412,740 business applications on average per month from January 1, 2020 to December 31, 2022.   The highest month was July 2020 with 552,214 new business formations (wow!).   Check the chart below.

graph US Census Bureau small business workers compensation requirement
(c) US Census Bureau

The Workers Comp Requirement Trap

The trap that I mentioned is if your company has over the state minimum employees to carry Workers Comp coverage.

I receive at least two calls/emails or more per month with this situation:

  • Very small business
  • Accident has occurred
  • No policy in place
  • Exclusive Remedy protections may not be in place
  • Has more than the minimum number of employees that requires coverage
  • Usually with a WC claim filed with the state – often by an employee’s attorney
  • State’s Workers Comp Commission has sent the business a notice of no coverage
  • Heavy fine letters from the Commission are pending
  • Often subcontractors with Ladder of Insurance
  • Paying the claim out-of-pocket can ruin the small business

If you are a very small business with low-risk employees, for instance, a Carpal Tunnel claim can often total $150,000 or more.  Use the article that I wrote earlier this week to aid your business in finding coverage.  You can avoid the Workers Comp requirement trap that you have set for your business.



James J Moore - Workers Comp Expert

Raleigh, NC, United States

About The Author...

James founded a Workers’ Compensation consulting firm, J&L Risk Management Consultants, Inc. in 1996. J&L’s mission is to reduce our clients’ Workers Compensation premiums by using time-tested techniques. J&L’s claims, premium, reserve and Experience Mod reviews have saved employers over $9.8 million in earned premiums over the last three years. J&L has saved numerous companies from bankruptcy proceedings as a result of insurance overpayments.

James has over 27 years of experience in insurance claims, audit, and underwriting, specializing in Workers’ Compensation. He has supervised, and managed the administration of Workers’ Compensation claims, and underwriting in over 45 states. His professional experience includes being the Director of Risk Management for the North Carolina School Boards Association. He created a very successful Workers’ Compensation Injury Rehabilitation Unit for school personnel.

James’s educational background, which centered on computer technology, culminated in earning a Masters of Business Administration (MBA); an Associate in Claims designation (AIC); and an Associate in Risk Management designation (ARM). He is a Chartered Financial Consultant (ChFC) and a licensed financial advisor. The NC Department of Insurance has certified him as an insurance instructor. He also possesses a Bachelors’ Degree in Actuarial Science.

LexisNexis has twice recognized his blog as one of the Top 25 Blogs on Workers’ Compensation. J&L has been listed in AM Best’s Preferred Providers Directory for Insurance Experts – Workers Compensation for over eight years. He recently won the prestigious Baucom Shine Lifetime Achievement Award for his volunteer contributions to the area of risk management and safety. James was recently named as an instructor for the prestigious Insurance Academy.

James is on the Board of Directors and Treasurer of the North Carolina Mid-State Safety Council. He has published two manuals on Workers’ Compensation and three different claims processing manuals. He has also written and has been quoted in numerous articles on reducing Workers’ Compensation costs for public and private employers. James publishes a weekly newsletter with 7,000 readers.

He currently possess press credentials and am invited to various national Workers Compensation conferences as a reporter.

James’s articles or interviews on Workers’ Compensation have appeared in the following publications or websites:

  • Risk and Insurance Management Society (RIMS)
  • Entrepreneur Magazine
  • Bloomberg Business News
  • WorkCompCentral.com
  • Claims Magazine
  • Risk & Insurance Magazine
  • Insurance Journal
  • Workers Compensation.com
  • LinkedIn, Twitter, Facebook and other social media sites
  • Various trade publications


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