If you own or operate a business in North Carolina, understanding your workers’ compensation obligations is an important part of staying compliant and protecting your employees.

North Carolina law requires many employers to maintain workers’ compensation insurance. However, determining whether your business is required to carry coverage can be more complicated than simply counting the people on your payroll.

Here’s what North Carolina employers should know.

Who Is Required to Carry Workers’ Compensation Insurance in North Carolina?

Under the North Carolina Workers’ Compensation Act, businesses that regularly employ three or more employees generally must obtain workers’ compensation insurance or qualify as a self-insured employer.

This requirement can apply to businesses organized as:

  • Corporations
  • Limited liability companies (LLCs)
  • Partnerships
  • Sole proprietorships

The three-employee threshold is particularly important for corporations. Corporate executive officers generally count as employees when determining whether the business meets the threshold, even when an officer has elected to be excluded from the corporation’s workers’ compensation insurance coverage.

For example, a corporation with two corporate officers and one additional employee may be required to maintain workers’ compensation coverage.

Are There Exceptions?

Yes. North Carolina law contains several exceptions and special rules.

Examples include certain:

  • Casual employees
  • Domestic servants directly employed by a household
  • Agricultural operations with fewer than 10 full-time, nonseasonal farm laborers regularly employed
  • Federal government employees
  • Railroad employees subject to other applicable laws

There are also special provisions for certain sawmill and logging operations.

Another significant exception works in the opposite direction: employers with one or more employees working in activities involving the use or presence of radiation are subject to workers’ compensation requirements regardless of the usual three-employee threshold.

Because exceptions can be highly fact-specific, employers should not assume their business is exempt without reviewing their circumstances.

Do Independent Contractors Count as Employees?

Calling someone an “independent contractor” does not necessarily make that person an independent contractor for purposes of North Carolina workers’ compensation law.

The North Carolina Industrial Commission specifically warns employers that issuing a worker a Form 1099 or referring to that person as an independent contractor does not automatically relieve the business of its responsibilities under the Workers’ Compensation Act.

The Commission may examine the actual working relationship, including factors such as the degree of control the employer exercises over how the work is performed.

This can create significant exposure for businesses that rely heavily on contractors.

What About Subcontractors?

Businesses that use subcontractors should pay particularly close attention to workers’ compensation coverage.

Under North Carolina law, a principal contractor, intermediate contractor, or subcontractor can potentially become responsible for workers’ compensation benefits when a subcontractor does not have required coverage.

As a result, businesses that hire subcontractors should have procedures for obtaining and maintaining current certificates of workers’ compensation insurance.

Simply assuming that a subcontractor is properly insured can expose a business to unnecessary risk.

What Happens if an Employer Does Not Carry Required Coverage?

Failing to maintain workers’ compensation insurance when it is legally required can have serious consequences.

According to the North Carolina Industrial Commission, an employer that fails to carry required coverage may face:

  • Financial penalties
  • Potential misdemeanor charges
  • Potential felony charges
  • Possible imprisonment in certain circumstances

An uninsured employer may also face direct financial responsibility for benefits owed to an injured employee.

For employers, workers’ compensation compliance should therefore be viewed as more than an insurance decision—it is also a legal and financial risk-management responsibility.

What Does Workers’ Compensation Insurance Cover?

Workers’ compensation is designed to provide benefits when an employee suffers a work-related injury or occupational disease.

Depending on the circumstances, benefits can include medical treatment, wage-replacement benefits and other compensation provided under North Carolina law.

Workers’ compensation also creates a structured system for handling workplace injury claims, helping employers and employees address covered injuries through the state’s workers’ compensation system.

Employers Also Have Responsibilities After an Injury

Having an insurance policy is only part of an employer’s workers’ compensation responsibility.

North Carolina employers must follow applicable reporting and claims procedures when workplace injuries occur. For example, the North Carolina Industrial Commission states that employers or carriers must file Form 19, Employer’s Report of Employee’s Injury to the Industrial Commission, within five days of learning of an injury or allegation of injury when the applicable reporting requirements are triggered.

Employers should establish an internal procedure for employees to report workplace injuries promptly and make sure managers know whom to contact when an accident occurs.

How Can North Carolina Employers Stay Compliant?

A few proactive steps can help businesses reduce workers’ compensation compliance problems:

  1. Review your employee count regularly. A growing company can cross the coverage threshold sooner than expected.
  2. Understand how your business structure affects the employee count. Corporate officers and business owners may be treated differently depending on the entity and circumstances.
  3. Review independent contractor relationships carefully. A 1099 does not automatically establish independent-contractor status for workers’ compensation purposes.
  4. Verify subcontractor coverage. Obtain certificates of insurance and develop a process for monitoring expiration dates.
  5. Keep payroll and job classifications accurate. Employee duties and payroll information can affect workers’ compensation classifications and premiums.
  6. Create a workplace injury reporting process. Employees and supervisors should know exactly what to do when an injury occurs.
  7. Review coverage as your business changes. Hiring employees, adding locations, entering new industries, or using more subcontractors can change your workers’ compensation exposure.

Workers’ Compensation Coverage for North Carolina Businesses

Workers’ compensation requirements can become complicated quickly, particularly for businesses with multiple owners, corporate officers, independent contractors, subcontractors, or employees performing different types of work.

At Fairway Insurance & Risk Management, we help North Carolina businesses evaluate their workers’ compensation insurance needs and find coverage appropriate for their operations.

Whether you’re hiring your first employees, reviewing an existing policy, or simply want to make sure your current workers’ compensation program keeps pace with your business, our team can help.

Have questions about workers’ compensation insurance for your North Carolina business? Contact Fairway Insurance & Risk Management today to review your coverage and discuss your options.

This article is provided for general informational purposes only and is not intended as legal advice. Workers’ compensation requirements and their application can vary based on the facts and circumstances of a business. Employers with questions regarding their legal obligations should consult qualified legal counsel or the North Carolina Industrial Commission.

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