Feb 14, 2023

Workers’ Compensation for Multi-State Businesses

Workers’ compensation insurance is regulated at the state level, but companies aren’t always confined within state borders. For multi-state employers, this can create a complex situation. To avoid compliance issues, multi-state businesses need to pay attention to various state requirements.

Workers’ Compensation Variation

Since states regulate workers’ compensation, there are different rules depending on what state you’re in. For example, all California employers must have workers’ compensation, even if they only have one employee. In Alabama, businesses with five or more employees need coverage.

How employers secure workers’ compensation coverage also varies. In many states, employers can buy coverage from private insurance companies, but some states are monopolistic, meaning they require employers to secure coverage from the state fund. IRMI reports that Washington, North Dakota, Ohio, Wyoming, Puerto Rico, and the U.S. Virgin Islands have monopolistic funds for workers’ compensation.

Many other rules and regulations vary between states. Plus, the costs can be substantially different. Since some states offer more generous benefits to injured workers, the state where a worker files a claim can have a big impact on compensation.

Employers with Locations in Multiple States

Some employers only have locations in one state, but companies often move into additional states as they expand. This impacts workers’ compensation insurance.

If your company operates in multiple states, you will need to secure workers’ compensation coverage for every state where you have employees. You may be able to purchase workers’ compensation for every state where you do business through one insurance carrier – as long as that carrier is licensed in all of the relevant states. However, since state programs vary and some states have monopolistic funds, this may not always be possible. You may need separate polices instead.

Workers’ Compensation Coverage for Traveling Employees

Even if your company operates in a single state, your employees may occasionally travel out of state to attend conferences or meet with clients and vendors. It’s important to ensure you have appropriate workers’ compensation coverage.

Even if your employees rarely travel out of state, coverage is important because employees may be particularly vulnerable to injuries while they’re traveling. For example, an employee could be injured in a car crash during a business trip. Although car crashes that occur during regular commutes are not generally covered by workers’ compensation, a car crash on a business trip could be considered work related and therefore be covered.

According to the Insurance Information Institute (III), your workers’ compensation policy will cover claims in the states named in the policy. These states typically appear on the declarations page of your policy. A worker injured in a state with more generous benefits could file a claim in that state, but your policy may not provide coverage. You can secure coverage for states where your workers might work occasionally by adding these states to the “Other States” section of your workers’ compensation policy. However, it’s important to note that you cannot add states with monopolistic workers’ compensation state funds to the Other States section.

Some states have reciprocal agreements with other states. For example, Washington (one of the monopolistic states) has reciprocal agreements with Idaho, Montana, Nevada, North Dakota, Oregon, South Dakota, Utah, and Wyoming. If your employees are based in these states, the reciprocal agreement means you can bring them into Washington temporarily without securing Washington’s L&I workers’ compensation coverage.

Workers’ Compensation for Remote Employees

The rise of remote work has created additional workers’ compensation complications. Many employees are taking advantage of remote work arrangements to move to less expensive locations, often in another state.

According to SHRM, some employees have even moved to other locations without notifying their employers. This can create headaches for HR professionals – not to mention liability – because the laws of the state where the employee lives may be the ones that apply, which impacts everything from payroll taxes to benefit requirements.

For example, Washington determines where employees are reported by considering the state where they regularly work (if they work at a place of business) or by considering the state where they live (if they also work there – for example, if they engage in telework). If any of your employees are based in Washington, you need to create a Washington state workers’ compensation account and report your Washington employees.

Managing Your Multi-State Workers’ Compensation Program

To meet your workers’ compensation requirements, you need to determine where all of your workers are based (including your remote workers) and ensure you have coverage for each applicable state. You also need to make sure your workers’ compensation policy covers workers who are traveling out of state on business.

Need guidance? Heffernan Insurance Brokers has deep experience with providing multi-state workers’ compensation programs. Insuring employees in multiple states can be very complex. Fortunately, we can guide you through every step and make the process surprisingly easy. Contact us.