Are Owners Included Or Excluded From Workers Compensation? – A confusing situation

Yes…no…maybe? Just like most things when it comes to workers compensation the answer is in the details!

The inclusion or exclusion of owners of a business from workers compensation coverage is governed by individual state statutes. You’ll find Corporate Officers, Members of LLC’s, Partnerships and Sole Proprietors are all addressed individually when it comes to rules of inclusion or exclusion. But beware…reading state statutes can be confusing!

So when asked if owners are included or not…you need more information before a correct answer can be given.

Here’s what you need to know:

  • What type of entity is the named insured? Is it a corporation; LLC; Sole Proprietor or Partnership? Because Members of a LLC will be treated differently than a Sole Proprietor and Corporate Officers will be treated different than Partners.
  • In what state is the business located and operated? Remember, workers compensation is state specific!

Here’s a couple of examples:

  • A Sole Proprietor or Individual in the state of Utah is not included under workers compensation, but may elect to be included. How can you tell? Read the state statute. It goes something like this:

                 “(3) (a) A partnership or sole proprietorship may elect to include any partner of   the partnership or owner of the sole proprietorship as an employee of the partnership or sole proprietorship under this chapter and Chapter 3, Utah Occupational Disease Act.
                         (b) If a partnership or sole proprietorship makes an election under Subsection (3)(a), the partnership or sole proprietorship shall serve written notice upon its insurance carrier naming the persons to be covered.
                         (c) A partner of a partnership or owner of a sole proprietorship may not be considered an employee of the partner’s partnership or the owner’s sole proprietorship under this chapter or Chapter 3, Utah Occupational Disease Act, until the notice described in Subsection (3)(b) is given.”

  • Members of a LLC are included in the State of Missouri. But may elect to be excluded. Here’s part of the statute:

                        “Missouri Statute 287.037. Notwithstanding any other provision of law to the contrary, beginning January 1, 1997, those insurance companies providing coverage pursuant to chapter 287, to a limited liability company, as defined in section 347.015, shall provide coverage for the employees of the limited liability company who are not members of the limited liability company. Members of the limited liability company, as defined in section 347.015, shall also be provided coverage pursuant to chapter 287, but such members may individually elect to reject such coverage by providing a written notice of such rejection on a form developed by the department of insurance, financial institutions and professional registration to the limited liability company and its insurer.”

You see the guidance for inclusion or exclusion from workers compensation coverage is controlled by statute. Finding, reading and interpreting individual state statutes can be a challenge. The wording of statutes are confusing and the form each individual state uses will be different.

As a final thought, statutes change! They are updated from time to time and we have seen in the past where the inclusion or exclusion status of an owner was changed by the state in question.

Be sure to check out our website,, for free information about workers compensation or if you need help with a workers compensation premium or audit problem!

Hope this helps you out! Thanks!