Is workers comp required in North Carolina?

Yes, for most businesses. North Carolina requires workers compensation once three or more employees are regularly employed in the same business, and from the first employee if the work involves the use or presence of radiation (G.S. 97-2, Industrial Commission). Corporate officers count toward the three.

Sole proprietors, partners and LLC members are not counted unless they elect coverage. A contractor who sublets work without getting a certificate of insurance can owe the sub's workers comp claims, even if the sub has fewer than three employees (G.S. 97-19). The standard policy has two main parts: Part One pays the benefits the law requires, and Part Two, employer's liability, covers certain lawsuits (standard policy form). Forms and endorsements vary by insurance company.

What a workers compensation policy covers

Part One, workers compensation. Pays the medical care, lost wages and other benefits the North Carolina Workers' Compensation Act requires when an employee is hurt on the job or gets sick from job conditions. It pays what the law requires rather than up to a set dollar limit.

Defense of comp claims. The insurance company defends claims for workers comp benefits at its own expense and handles the claim with the Industrial Commission.

Part Two, employer's liability. Covers lawsuits tied to an employee injury that workers comp does not take care of, such as a spouse's claim or a suit from a third party. Standard limits are $100,000 each accident, $500,000 disease policy limit and $100,000 disease each employee, and higher limits are available.

Part Three, other states. Extends coverage if you start work in a state listed on the policy for other states coverage. If your crews travel, make sure the right states are listed.

Owners who elect coverage. Sole proprietors, partners and LLC members who actively work in the business can choose to be covered as employees. Corporate officers are covered unless they are specifically excluded.

Federal and maritime work. Work on docks, piers, vessels or other jobs under federal compensation laws needs its own endorsement. The standard policy does not pick it up on its own, which matters for marine businesses on the coast.

What it usually does not cover

• Owners, partners and LLC members who did not elect coverage
• True independent contractors, though a worker labeled a contractor can still be found to be your employee
• Occupational accident policies are not a lawful substitute for workers comp (Industrial Commission FAQ)
• Work in a state that is not listed on the policy
• Federal Longshore, Jones Act and similar exposures unless endorsed
• Uninsured subcontractors you did not collect a certificate from can be added to your premium at audit

Forms, endorsements and availability vary by insurance company. Your own policy governs.

Who needs workers comp in North Carolina

• Any business with three or more employees regularly employed in the same business, counting part-time staff who work for you regularly
• Any employer with even one employee whose work involves the use or presence of radiation
• General contractors and subcontractors who sublet work. See Contractor Insurance
• Motor carriers using owner-operators who do not carry their own coverage (G.S. 97-19.1). See Trucking Insurance
• Smaller employers who want the protection. Once you buy a policy, the Act applies to you and your employees
• Owners who want their own injuries covered and are willing to elect in

North Carolina workers comp rules

The three-employee rule. The Act covers private employment where three or more employees are regularly employed in the same business, or where one or more employees work in activities involving radiation (G.S. 97-2, G.S. 97-13). Every covered employer must insure with an authorized insurer or be licensed to self-insure, and must post a notice in the workplace (G.S. 97-93).

Exemptions. The Act does not apply to casual employees, domestic servants, federal employees, or farm laborers when fewer than 10 full-time nonseasonal farm laborers are regularly employed (G.S. 97-13). Certain small sawmill and logging operators are also excluded (G.S. 97-2). Sole proprietors, partners and LLC members may elect to be covered, and corporate officers count as employees but may be excluded from the policy (Industrial Commission).

Contractors and subcontractors. A contractor who sublets work without first getting a certificate of workers comp insurance from the sub can be liable for the sub's employee injuries, no matter how few employees the sub has (G.S. 97-19). You can check whether a business has coverage with the Industrial Commission's insurance coverage search.

Employees versus independent contractors. Treating an employee as an independent contractor to avoid workers comp and other obligations is employee misclassification under state law (G.S. 143-786). The Industrial Commission has an Employee Classification Section that investigates complaints.

Penalties for going without. An employer who should carry coverage and does not faces a penalty of $1 per employee per day, at least $20 and at most $100 a day, and remains liable to injured employees. Willful failure is a Class H felony and neglect is a Class 1 misdemeanor (G.S. 97-94).

Where you buy it. Most employers buy from insurance companies in the regular market. Employers who are entitled to coverage but cannot get it the regular way can apply to the North Carolina Workers Compensation Insurance Plan, the assigned risk plan administered by the NC Rate Bureau (NCRB Rule 4, G.S. 58-36-1).

Class codes, experience mods and audits. The NC Rate Bureau assigns classifications to employers' operations and calculates experience modifications from claims data (NC Rate Bureau). The business is classified, not each job, with standard exceptions such as clerical office staff (NCRB Rule 1). The premium on your policy is an estimate, and the final premium is set by audit of actual payroll after the policy ends (standard policy, Part Five).

Reporting an injury. When an injury keeps an employee out more than one day or medical charges exceed the Commission's set amount, the employer must report it to the Industrial Commission within five days of knowing about it (G.S. 97-92). The report is Form 19, and filing it is not the employee's claim.

What drives the cost of workers comp

Workers comp premium is a rate times your payroll for each classification, adjusted for your own claims history. These are the main factors:

• Classification codes for the work your business does
• Payroll in each classification, including officers and anyone else whose injury the policy could have to pay
• Your experience modification, which reflects your claims compared with similar businesses
• Payments to subcontractors who could not show a certificate of insurance
• Whether owners and officers are included or excluded
• Regular market or assigned risk plan
• Employer's liability limits above the standard
• Safety programs, return-to-work practices and claim reporting speed
• Minimum premium rules for small payrolls

We do not publish average prices. A licensed advisor quotes your actual situation across more than 100 insurance companies.