Having employees in more than one state is becoming more common, especially with the rise in remote work. If you have employees in multiple states, your workers’ comp may not cover them. To ensure proper protection, you need to purchase workers’ comp for out-of-state employees.
This guide will walk you through how workers’ comp coverage works when state lines are crossed and what you need to do as a business owner to make sure all your employees are adequately covered.
Workers’ comp insurance is required for almost every business in nearly every state. If your company has full-time or part-time employees, your state likely requires you to have workers’ comp coverage. However, the laws for workers’ comp can vary by state, so it can get confusing if you have employees in multiple states.
Many states require workers’ comp insurance when your company hires the first employee. However, other states have different guidelines. For example, businesses in Alabama don’t need workers’ comp insurance unless they have five or more employees. Louisiana businesses don’t have to provide coverage for real estate agents, some non-profit employees, certain public officials, or performers. Texas is the one state that doesn't require workers’ comp insurance at all.
Some businesses may even be exempt from needing workers’ comp insurance at all, regardless of the state. For example, out-of-state LLC workers’ comp coverage isn’t always needed because LLCs without any employees don’t need workers’ comp insurance.
Typically, a business owner only needs to know their state's requirements. However, if your company has employees in another state, you’ll need to know the requirements of the state they’re located in and when you’ll need to provide coverage for those employees.
All your employees should be covered by workers’ comp insurance. If you have employees who are working temporarily out of state, they may be covered by your policy.
However, this is only true if you have extraterritorial insurance or “other states coverage.” This policy will cover employees who work in another state occasionally or travel between states for work for several weeks at a time.
However, if you have permanently out-of-state employees, the situation is different. You will need coverage for the state the employee resides in to ensure they are covered under your insurance policy.
The easiest way to get this coverage is to purchase workers’ comp insurance from a carrier licensed in all the states where you need coverage. The other option is to buy coverage from multiple carriers, but they can be complicated to keep up with.
The situation becomes a bit more complicated if you have employees in a monopolistic state. These states require you to purchase workers’ comp coverage from the state-run fund instead of a private insurance company, so you must have a separate policy for employees in those states. The four monopolistic states are Wyoming, North Dakota, Washington, and Ohio.
If there’s a workers’ comp injury out of state, the employee will file a workers’ comp claim in the state where the injury occurred. For example, if your employee lives in South Carolina but got injured on a work trip to Georgia, the claim would be filed in Georgia. This is why it’s essential to have coverage that extends to other states for temporary assignments.
If you have workers who are permanently located out of state and need to file a claim, the claim would be filed in their state. Again, this is why ensuring proper insurance coverage for all employees, regardless of where they live, is crucial.
If you don’t have coverage for an out-of-state workers’ comp incident, your business will be left liable for the damages. If an employee is considered a resident of a state, they will need to file claims through that state. Your business is left unprotected if their state isn’t listed on your workers’ comp insurance policy.
This lack of insurance coverage means you’ve likely broken the state’s laws about workers’ comp, and the injured employee will be able to sue you for damages, and there’s no coverage to protect you.
Depending on the severity of the incident, you may be left paying thousands of dollars in lost wages, medical bills, or funeral expenses, among other elements like legal fees. This is why workers’ comp out-of-state coverage is imperative to the success of your multi-state business.
Section 3A of your workers’ comp policy is where you’ll find the list of states that your coverage will apply under the policy you have. Section 3A is different from 3C, which is other states' insurance, mentioned above.
To ensure coverage of workers’ comp for out-of-state employees, section 3A of your policy should include any state that meets the following requirements:
Your policy shouldn’t include North Dakota, Ohio, Washington, or Wyoming since they are monopolistic states.
Section 3C handles your other states' insurance and is seen as a catch-all section of your policy that says you can extend temporary coverage to states that aren’t expressly mentioned in your policy. This section can’t apply to employees who permanently reside in another state.
What happens if an employee is moving out of state while on workers’ comp? The simple answer is that they will still be covered, but there will likely be an impact on their case. The employee must update their information with your company, including providing their new address, legal team, and workers’ comp doctor. Without this information, there could be a lapse in the employee’s coverage.
If you have an employee moving out of state while out of work on a workers’ comp claim, contact your underwriter to see what steps need to be taken.
Since workers’ comp is regulated at the state level, not at the federal level, each state has its own rules regarding coverage. When your company needs workers’ comp for out-of-state employees, it’s essential to know the different requirements for each state.
Here’s a quick rundown on common areas in which state policies may differ:
If your company needs workers’ comp insurance in multiple states, your premium is likely higher than you may have expected. However, there are ways to reduce costs if you take the proper steps to prevent workplace injuries.
Having safety protocols in place is imperative for keeping your premiums low. It can be hard to enforce safety when employees are in multiple states, but it can be done. Ensure all employees are trained on safe workplace practices, even those working from home. Provide proper protection and equipment at all sites to keep employees safe, regardless of state.
It's also vital to ensure employees know the proper procedure to follow if an incident happens, regardless of location. Proper knowledge will help incidents be reported quickly, allowing the concerns to be addressed as soon as possible. This can prevent a repeat incident and promptly get the injured worker medical attention, which can shorten recovery time.
So, do out-of-state workers need workers’ comp coverage? In general, the answer is yes. Unless the specific state has a law that doesn’t require you to cover your employees located there, you will need to provide coverage for your employees in all states.
Employees who work in another state temporarily (less than 30 days at once) can be covered under section 3C of your workers’ comp policy. If you have employees who spend more time than that in another state or who live out of state, you’ll need coverage specified for that state, either in section 3A of your policy or with a unique policy for that state.
No matter how many states you’re located in, Kickstand Insurance can help you get workers’ comp for out-of-state employees. Request a free quote and get a final offer within 48 hours. You’ll be protecting your business and employees across state lines in no time.
Note: The information provided in this blog is intended for general informational purposes only and is not a substitute for professional legal or insurance advice. Laws and regulations regarding workers' compensation insurance are complex and vary by state and by specific circumstances. Therefore, readers are encouraged to consult with a qualified legal or insurance professional to obtain advice with respect to any particular issue or problem they might have.
Mordechai Kamenetsky, co-founder and lead agent of Kickstand, is recognized as an expert in workers' compensation. He is passionate about helping small businesses manage risks and lower their workers' comp costs. In his articles, he educates readers and clients on the intricacies of workers' comp insurance.