Workers’ Compensation Reminder

A question came up recently about corporate officers and workers’ compensation. If you have a small corporation with three corporate officers and no other employees and the corporate officers want to opt out of coverage, is the corporation still required to buy a workers’ compensation policy?

We believe that answer to be yes? We are not providing legal advise and, if there is any question, a legal opinion from an attorney should be obtained.

The current NC Workers’ Compensation Act requires employers of three or more regular employees to provide workers’ compensation benefits. The Act also provides that a corporate officer, compensated or not, is an employee. But the Act allows corporate officers to opt out of the WC coverage.

In our example above, a corporation has three corporate officers which are by statute employees. Therefore it meets the statutory requirement to provide workers’ compensation coverage. The fact that one or more of the three officers opts out of coverage does not exempt the corporation from complying with the Act. Therefore the corporation would have to purchase a minimum premium workers’ compensation policy to avoid the fines and penalties associated with being out of compliance with the Workers’ Compensation Act.

While some of these rules have not been strictly enforced in the past, a new and enhanced enforcement and compliance division at the NC Industrial Commission is charged with enforcement of the Act. Please advise your insureds that failure to comply with the WC law can have expensive consequences.

E. Stuart Powell, Jr., CPCU, CIC, CLU, ChFC, ARM, AMIM, AAI, ARe, CRIS
Vice President and Interim CEO