Employers' Requirement To Carry Workers Compensation Insurance

The North Carolina Workers Compensation Act requires that all businesses that employ three or more employees, including those operating as corporations, sole proprietorships, limited liability companies and partnerships, obtain workers compensation insurance or qualify as self-insured employers for purposes of paying workers compensation benefits to their employees. Exceptions to this requirement include (a) employees of certain railroads; (b) casual employees, i.e., persons whose employment is both casual and not in the course of the trade, business, profession or occupation of the employer; (c) domestic servants directly employed by the household; (d) farm laborers when fewer than 10 full-time, non-seasonal farm laborers are regularly employed by the same employer; (e) federal government employees in North Carolina; and (f) "sellers of agricultural products for the producers thereof on commission or for other compensation, paid by the producers, provided the product is prepared for sale by the producer.".

Businesses in which one or more employees are employed in activities which involve the use or presence of radiation are required to have workers compensation coverage.

Individuals who are sole proprietors, members of LLCs, and partners are not automatically counted as employees. Corporate officers may elect to be excluded from coverage but are still counted in determining whether a business has three or more employees. Executive officers, directors, or committee members of a non-profit corporation are also not automatically counted as employees so long as they meet certain requirements under the North Carolina General Statutes.

An employer is not relieved of its liability under the Act by calling its employees "independent contractors." Even if the employer refers to its workers as independent contractors and issues a Form 1099 for tax purposes, the Industrial Commission may still find that the workers were in fact employees based upon its analysis of several factors, including but not limited to the degree of control exercised by the employer over the details of the work.

If you subcontract work to a subcontractor who does not have workers compensation insurance, you may be liable for the work-related injuries of the subcontractor's employees, regardless of the number of employees you or the subcontractor employs.