Workers' Compensation Exemption re Number of Employees

In some states, an employer is exempt from maintaining workers' compensation insurance if it regularly employs only a certain number of employees. For example, with certain exceptions, employers in Alabama, Arkansas, Georgia, Virginia, New Mexico, and North Carolina are exempt if they have less than three employees. Employers in Rhode Island and South Carolina are exempt if employing less than four employees while employers in Mississippi, Missouri, and Tennessee are exempt if employing less than five employees. If the employee is injured and the state has altered its exemption statute, the operative version of the statute on the date of the employee's injury will control.

The exemption hinges on those employees who are regularly employed and will not suddenly disappear because the number of employees has temporarily dropped below the statutory number of employees. The language of each state's statute will determine who is an "employee" for purposes of the exemption. For example, if the exemption statute uses the word "employees," then those individuals who are partners, proprietors, and casual or unpaid workers would likely not be counted. On the other hand, if the statute uses "worker" instead of "employee," a wider net is cast for individuals who may be counted for purposes of the exemption. Many states with exemption statutes count all employees, even though working in different branches of the employer's business, but do not count employees working in independent businesses that share the same premises.

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