If you’re wondering whether you need workers’ compensation insurance, the short answer is almost certainly yes. Connecticut has some of the strictest workers’ compensation requirements in the nation, and the state leaves little room for guesswork. If your business has even one employee, coverage is legally mandated, regardless of whether that single employee works part-time, full-time, or on a seasonal basis.
This can catch many small business owners off guard, especially those from states with higher thresholds. The bottom line is that Connecticut takes workplace protection seriously, and the penalties for noncompliance can put a small operation out of business.
There are exceptions, however, and some gray areas that are worth understanding. Here is a closer look at what the state actually requires and what happens to those who try to skip it.
Essential Takeaways:
- Connecticut requires workers’ compensation coverage once a business has one or more employees.
- Sole proprietors, LLC members, corporate officers, and partners can opt out of covering themselves.
- Noncompliance penalties start at $500 per employee or $5,000, whichever is less, and can reach up to $50,000.
- Willful failure to carry this important coverage is a Class D felony under Connecticut law.
- Private carriers, self-insurance, and the assigned risk pool are all available options.
Who Does Connecticut Law Require to Carry Coverage?
Under the Connecticut Workers’ Compensation Act, any employer with at least one employee must maintain workers’ compensation insurance, regardless of the business’s structure or classification. This goes into effect the moment someone is added to the payroll, and it covers any injuries, occupational illnesses, and fatalities that happen related to work.
This is a dramatic contrast with other states, some of which set the threshold at three or five employees. Although this may seem extreme, it’s important to keep in mind that even a single workplace injury can result in tens of thousands of dollars in lost wages and medical bills. Without coverage, you, as the business owner, would be personally liable for all of this.
Which Business Owners and Workers Are Exempt?
It is important to understand that not everyone will fall under this mandate, however. Sole proprietors are excluded, although many do choose to obtain it for greater protection. LLC members, the partners in a partnership, and corporate officers are included by default. Still, they have the option to file for an exclusion using the appropriate form with the Workers’ Compensation Commission. Household employees who work for fewer than 26 hours per week are also exempt.
Another gray area is independent contractors. The Connecticut Workers’ Compensation Commission will apply a “right to control” test to determine whether an individual is an independent contractor or an employee. This means that if the business controls how the contractor performs the work and when it is completed, the contractor is usually considered an employee for workers’ compensation purposes, and auditors actively look for misclassifications.
What Happens When a Business Operates Without Coverage?
The consequences can be steep. According to the Connecticut General Statutes, an employer who is found to be in violation of workers’ compensation compliance requirements under Section 31-288 is subject to a required civil penalty starting at no less than $500 for each employee or $5,000, whichever of the two figures is smaller; this is limited to no more than $50,000 overall.
On top of this, employers will be responsible for an additional $100 per day in penalties for ongoing noncompliance after the initial finding, capped at a maximum aggregate of $50,000. If the penalties remain unpaid past 90 days, the state could elect to file a civil lawsuit to double the total amount due.
However, it doesn’t stop there. Knowingly and willfully failing to comply with the workers’ compensation requirements is classified as a Class D felony under Connecticut law. This means there is a potential for prison time, not just fines. Similar consequences are imposed for employers who misclassify their employees as independent contractors to avoid paying these premiums; they could also be hit with a stop-work order.
How Can Connecticut Businesses Obtain Coverage?
Unlike some other states, Connecticut does not have its own state-run insurance fund. This means employers must purchase coverage through private insurance carriers. You can choose to rely on an insurance broker or agent, or you can contact carriers directly. The rates for this insurance are set annually by the Connecticut Insurance Department in consultation with the National Council on Compensation Insurance (NCCI) and vary based on classification codes, payroll size, and claims history.
Businesses that have difficulty finding coverage in the standard market can use the NCCI Workers’ Compensation Insurance Plan (WCIP), an assigned risk pool. Self-insurance is also an option for larger employers who meet certain financial qualifications. Once you have obtained proper coverage, you must post a Notice to Employees form in a visible location at your workplace.
Work With JMG Insurance Agency to Find the Right Policy
Workers’ compensation insurance doesn’t have to be confusing or overpriced. At John M. Glover Insurance Agency, we work with multiple carriers to compare rates and find the right fit for your business and budget. Contact us today to secure that your business stays compliant and protected.
