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Workers' compensation: When is insurance required?

The North Carolina Workers' Compensation Act dictates that specific classifications of employers must maintain workers' compensation insurance to pay for the medical care required by employees hurt on the job. This insurance will also pay for wage replacement benefits if a worker is too injured by an on-the-job injury to perform his or her job duties.

It's vital that every employer in North Carolina understands his or her obligations regarding the need to maintain workers' compensation insurance.

Which employers need insurance and which ones don't?

All employers that have three-plus employees -- including employers that are sole proprietors, corporations, partnerships and limited liability companies -- must maintain workers' compensation insurance. Alternatively, the employer needs to satisfy the requirements for being self-insured.

This requirement applies to all employees except for:

  • "Casual employees" whose employment doesn't fall under the trade of services offered by the employer;
  • Certain railroad employees; domestic servants working for a household; farm workers at farms with fewer than 10 full-time workers;
  • Federal employers in North Carolina; and
  • Those who are selling agricultural products on a commission basis on behalf of the farmers or producers of the products.

It's important to note that sole proprietors with their own businesses, and LLC members or partners will not be counted as one of the three employers that will trigger the workers' compensation requirements. Also, it's important to note that businesses with employees who work in the presence of radiation -- even if they just have one employee -- must maintain workers' compensation insurance.

What if the employees are "independent contractors?"

Employers do not absolve themselves of liability for workers' compensation payments simply by trying to classify their employees as independent contractors. Only certain workers may be classified as "independent contractors" under North Carolina workers' compensation laws. Therefore, employers and employees alike should make sure they fully understand what their or their employees' true status is under the Workers' Compensation Act for the purpose of assessing the liability to pay injured worker benefits.

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