What Michigan says about who must carry it
From the state of Michigan
The Workers’ Disability Compensation Act (WDCA) requires employers that meet the following criteria to carry workers’ compensation insurance:
- All private employers regularly employing 1 or more employees 35 hours or more per week for 13 weeks or longer during the preceding 52 weeks.
- All private employers regularly employing 3 or more employees at one time, including part-time employees.
- Agricultural employers, if they employ 3 or more employees 35 hours or more per week for 13 or more consecutive weeks.
- Householders employing domestic servants, if they employ anyone 35 hours or more per week for 13 weeks or longer during the preceding 52 weeks.
- All public employers.
The state lists three ways to comply: purchasing insurance, self-insuring, or properly executing an exclusion form. An employer that doesn’t meet the criteria may also choose to take on the liability voluntarily. The state also warns that failing to comply could result in prosecution and financial penalties.
Source: Michigan Department of Labor and Economic Opportunity, Workers’ Disability Compensation Agency, “Workers’ Disability Compensation Insurance Requirements.” This is a summary for general information, not legal advice. Confirm your specific obligations with the agency or a legal professional.
Who counts as an employee?
The state’s definition is broader than many owners expect. According to the same page:
- An employee is any person in the service of another under any contract of hire, express or implied.
- A partner is considered an employee of the partnership.
- A corporate officer is considered an employee of the corporation.
- A member who is a manager is considered an employee of a limited liability company.
- A sole proprietor working in his or her own sole proprietorship is never an employee of that business.
Questions that change the answer
- How many people work for you, and do you count part-time staff?
- How many hours a week do your employees usually work, and for how many weeks a year?
- Do you have owners, partners or officers who take part in the business?
- Are the people you pay employees or independent contractors? How workers are classified matters, and a legal professional can advise you on that legal question.
- Are you hiring for the first time, or adding seasonal help?
How it fits with your other coverage
Workers’ compensation is for injuries and illnesses connected to the job. It works alongside, not in place of, the other business coverages. General liability is aimed at claims from other people, and commercial auto addresses vehicles.
Good moments to talk with an agent
- You’re hiring your first employee
- You’re adding seasonal or part-time staff
- Owners, partners or officers are joining or leaving the business
- Payroll or job duties are changing significantly
- You’re not sure whether your workers are employees or contractors
What helps start a quote
- The number of employees and their general job duties
- Estimated payroll by type of work
- Whether owners or officers work in the business
- Your current carrier and renewal date, if you have coverage
- Information about past claims, if any
Common questions
Do I need workers’ compensation if I only have part-time employees?
Per the state’s published criteria, part-time employees count toward the “3 or more employees at one time” threshold. The other criteria look at employees who work 35 hours or more per week for 13 weeks or longer during the preceding 52 weeks. Confirm how the criteria apply to your business.
Am I covered as a sole proprietor?
The state’s page says a sole proprietor working in his or her own sole proprietorship is never an employee of that business. That’s a definitional point about the requirement, not a description of what any policy provides you. An agent can talk with you about your options.
What if I use independent contractors?
Classification depends on the facts of each working relationship, and a mistake can be costly. We can explain the insurance side and the questions to ask, but the legal classification question is one for a legal professional or the state agency.
What are the penalties for not having coverage when it’s required?
The state says failing to comply with coverage requirements could result in prosecution and financial penalties. See the state’s page for its explanation.