At Holley Insurance, we understand that workers’ compensation insurance can be a daunting subject for employers. Navigating the requirements of Virginia law, ensuring compliance, and maintaining proper coverage for your business can feel overwhelming. That’s why we’re here to make it easier for you, offering clear, expert guidance on workers’ compensation insurance in Virginia.
Whether you’re a small business owner or a large enterprise, this guide will help you understand your responsibilities, avoid costly mistakes, and protect your employees and your business in Virginia.
What is Workers’ Compensation Insurance?
Workers’ compensation insurance provides a safety net for both employers and employees in the event of a work-related injury. In Virginia, this insurance is required by law for most employers, offering benefits to injured employees while shielding employers from civil lawsuits related to workplace injuries.
- For Employers: It serves as an exclusive remedy, meaning employees cannot sue their employer for work injuries.
- For Employees: It offers prompt benefits, including medical expenses and compensation for lost wages, but these benefits are limited.
When Are Employers Required to Have Workers’ Compensation Coverage?
In Virginia, the law requires that employers who regularly have more than two part-time or full-time employees carry workers’ compensation insurance. But it’s not just about your direct employees—subcontractors’ employees are also included in the headcount for determining whether you need coverage.
Even if your subcontractors have their own coverage, your business may still be liable for providing workers’ compensation if you exceed two employees. It’s crucial to maintain proof of coverage for all subcontractors, as failure to do so may result in audits and additional premiums.
Who Counts as an Employee?
To determine whether your business requires workers’ compensation coverage, it’s essential to understand who qualifies as an “employee.” Virginia law includes the following groups as employees:
- Corporate officers and LLC managers (even if they don’t work regularly or earn a salary)
- Family members working for the business
- Undocumented workers
- Temporary, seasonal, and part-time workers
- Minors
- Workers for churches, charities, and non-profits
These individuals are all part of your workforce for the purposes of workers’ compensation insurance, so they must be considered when determining if you need coverage. Learn more about classifying employees here.
Contractor and Subcontractor Considerations
If your business hires subcontractors, be aware that their employees are counted as part of your total workforce for workers’ compensation purposes. This means that even if a subcontractor is a sole proprietor with no employees, you could still be required to provide coverage for their workers.
Contractors should request proof of coverage for every subcontractor they hire. Not only does this help ensure compliance, but it also prevents the business from being charged unnecessary premiums.
Sole Proprietors: Is There a Waiver?
In Virginia, there is no waiver or exemption form for sole proprietors who feel they don’t need workers’ compensation insurance. If you employ more than two part-time or full-time workers, you must have coverage—there are no exceptions.
Independent Contractor vs. Employee
Some employers designate workers as independent contractors (paying them on a 1099 form) to avoid the responsibilities of workers’ compensation coverage. However, the designation and tax form are irrelevant under Virginia law.
What truly matters is the nature of the working relationship. The courts will examine whether the employer controls how the work is done, whether the worker is paid wages, and whether the worker can be dismissed at will. If the employer has significant control over the work process, the worker is likely considered an employee, not an independent contractor.
Workers need to be classified based on the type of work they perform. If they are incorrectly classified, you will pay at an audit. You can learn more about that here.
Workers’ Compensation Coverage for LLCs
Managers of an LLC are treated as employees under Virginia’s workers’ compensation laws. However, LLC members are not automatically covered unless they perform work or earn pay. LLCs with only one member can choose whether to elect coverage, but additional questions may arise if that member works for the business.
How to Obtain Workers’ Compensation Coverage
In Virginia, businesses have several options for obtaining workers’ compensation coverage:
- Commercial Coverage through an insurance agent or carrier (like us!)
- Self-Insurance, if the business meets specific financial requirements
- Group Self-Insurance, where businesses band together for coverage
- Registered Professional Employer Organization (PEO)
At Holley Insurance, we can guide you in selecting the right type of coverage for your business needs.
Out-of-State Employers and Virginia Coverage
If you’re an out-of-state employer and your business operates in Virginia, it’s important to ensure you have the proper coverage. Simply adding a Virginia Amendatory Endorsement to your existing out-of-state policy may be enough to comply with Virginia law.
However, if your insurer isn’t licensed in Virginia, you’ll need to obtain a separate workers’ compensation policy from a Virginia-licensed carrier.
Employer Responsibilities
As a business owner, you have several key responsibilities when it comes to workers’ compensation:
- Review coverage requirements regularly
- Maintain proper coverage when required by law
- Report work injuries promptly to your insurance carrier
- Post a Workers’ Compensation Notice (VWC Form 1) at your workplace
- Do not deduct the cost of insurance from employees’ wages
We’ve got a ton of workers comp tools for you on our Business Owner’s Resource Guide. Check them out here!
How Much Does Workers’ Compensation Insurance Cost?
The cost of workers’ compensation insurance varies based on several factors:
- Classification code (determining the industry type)
- Payroll size
- Experience modifier, which reflects your business’s claim/loss history
Businesses in more hazardous industries or with higher payrolls will pay higher premiums. At Holley Insurance, we can help you navigate these factors to find the best rates for your business. Request your FREE Mod Report from Holley Insurance here!
Reducing Workers’ Compensation Costs
Want to reduce the cost of workers’ compensation insurance. Here are a few ways to lower your premiums:
- Implement workplace safety measures and conduct regular training to reduce injuries
- Promptly report injuries and ensure employees receive timely medical treatment
- Provide transitional duty and return-to-work opportunities to help injured workers get back on the job faster
A focus on safety and early intervention can lead to lower claim costs and, in turn, reduced insurance premiums. Check out our best tips for reducing your workers comp insurance in this quick video:
Penalties for Being Uninsured
Failing to maintain required workers’ compensation coverage can lead to severe penalties, including:
- A civil penalty of up to $250 per day for each day the business is uninsured
- A maximum penalty of $50,000 and additional costs
- Potential criminal prosecution and civil suits from injured workers
The cost of neglecting workers’ compensation insurance far outweighs the investment in coverage.
Contact Holley Insurance for Expert Guidance
At Holley Insurance, we’re committed to helping businesses in Virginia navigate the complexities of workers’ compensation insurance. Whether you’re looking for guidance on coverage options, pricing, or compliance, our expert team is here to help.
For more information or to get a personalized quote, contact Holley Insurance today. We’ll ensure your business stays covered, compliant, and ready for any challenges that come your way.
