In most states, every employer must secure workers compensation insurance for its employees, no matter how many or how few employees one has. It applies to natural persons as well as businesses.

Employee vs. Independent Contractor
Workers compensation insurance is not necessary for independent contractors. Whether a worker is an employee or an independent contractor is governed by a special set of guidelines established by the courts.

The guidelines may be applied differently to each situation depending on the facts, but the main considerations are:

• How much control is exercised over the worker
• What relationship the worker and the employer intend to create
• How the worker is paid

Defining Employee
Generally, everyone who has another in his or her service as an employee (one who is not intended to be an independent contractor) must secure workers compensation insurance. Persons usually considered employees might include:

• Aliens and minors
• Corporate officers and directors
• Working members of a partnership or limited liability company
• Housekeepers, groundskeepers, or babysitters working in the home (with exceptions described below)

Other Individuals
Certain persons are generally not considered employees and do not need workers compensation insurance. They include:

• The employer's parent, spouse, or child
• Those working for a charitable organization in exchange for room and board
• Housekeepers, groundskeepers, or babysitters working less than 52 hours or earning less than $100 in the preceding 90 days before they were injured

If you secure workers compensation insurance and an employee is injured, the employee may only seek compensation through the workers compensation system.

However, if you have an employee or employees, and you do not have workers compensation insurance, an injured employee may sue you directly for damages. If this happens, the procedures are weighted heavily in favor of the injured employee.

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