Workers' Comp Requirements by StateAll 50 States

Nearly every state makes workers' compensation mandatory once a business has employees, though the employee count that triggers the requirement varies — some states require it at the first employee, others at three or five. Texas is the notable exception: it lets most private employers opt out of the state workers' comp system (becoming a 'nonsubscriber'), though doing so carries significant liability risk. A few states operate a monopolistic state fund, where coverage must be bought from the state rather than a private insurer.

In most states, sole proprietors, partners, and LLC members are automatically exempt from covering themselves — but they can usually elect coverage voluntarily, which is often wise if they work on job sites alongside employees. The moment you hire W-2 employees, the state's threshold rules apply. Independent contractors are generally not counted, but misclassifying employees as contractors to avoid coverage is a common and costly compliance mistake.

Premiums are calculated per $100 of payroll, with the rate set by your industry's risk classification (a clerical office pays a fraction of what a roofing contractor pays) and your claims history (experience modifier). The state averages shown in this tool are blended figures across all industries — your actual rate depends heavily on your class codes. Maintaining a strong safety record and correct class codes is the biggest lever on cost.

Operating without required coverage exposes a business to state penalties (fines, stop-work orders, and in some states criminal charges) and — more dangerously — to being personally sued by an injured worker without the liability protections that workers' comp provides. Because an uncovered workplace injury can be financially catastrophic, carrying coverage even where you're technically exempt is often the prudent choice.