Workers Compensation Waivers – The who, what, when and how

We receive many requests for information about workers compensation waivers, what they are, who can use them, when they can be used and how they work. So in this blog we’re going to look into the world of waivers as a workers comp issue!

Lets go ahead and get this out of the way…in the majority of states, non-owner employees cannot waive out of workers compensation coverage. In other words an employee cannot sign a sheet of paper and opt out. There are some exceptions and we’ll mention a few as we go along but as an example, in the state of Missouri, a non-owner employee cannot elect out of coverage. This means that the employees payroll must be included in the premium calculation and workers compensation benefits, as outlined by the state of Missouri, will apply. For the most part, and in most states, you’ll find it’s against public policy that an employee can opt out of coverage. After all, the whole point of workers comp is to protect an injured employee.

There’s always confusion about the term “waiver” and that’s probably brought about because in insurance lingo it means different things in different circumstances. You’ll find  “workers compensation waiver of subrogation” and “workers compensation waiver” are often confused. A waiver of subrogation has to do with an employer waiving the rights of the workers comp insurance company to pursue subrogation for dollars spent on a claim when another entity was at fault. These agreements are usually found in some type of contract that an employer signs in order to secure a job or work. Be careful with this! Be sure to read the policy! Even though you may sign a contract you’ll find for workers compensation issues waiver of subrogation is not allowed, unlike it’s use in a general liability policy where an employer may typically waive the insurance carriers rights before an accident or occurrence. Whereas the stand alone term waiver most often refers to an individual employee, owner or some type of executive officer opting out of coverage under the policy. So when we talk about waivers we need to better understand what you’re really asking about!

In some circumstances an individual waiver is used as the method of excluding certain types of employers who may otherwise be automatically included within coverage. For example most states automatically include corporate officers however many allow certain corporate officers to exclude themselves. Some states require a completed form or waiver be filed with the state for this election of exclusion to be valid. Other states may allow LLC members to opt out of coverage and likewise require a waiver be signed and on file for this to be considered a valid exclusion. Some states will require the only notification be provided to the insurance company and not be filed with the state authorities.

You’ll find another common use of waivers is in the area of contractors and independent contractors. Some states specifically define the term independent contractor. And you’ll find they will allow independent contractors, as defined in their statutes, to provide a waiver to those they are providing services thus exempting the hiring contractor from workers compensation responsibility.

A few words of caution! Each individual state workers compensation rules must be reviewed before making a proper determination of inclusion or exclusion and whether or not they require the use of a waiver or special form for this action. Also, watch out for the definition of employee because each state can be different and when it comes to waivers what you think the state considers an employee may not be what you think.

So here’s a quick recap:

What are waivers?

  • Workers compensation waivers are state approved documents that upon proper completion allow only certain individuals to opt out of coverage provided under the state act.

Who can use workers compensation waivers?

  • It’s state specific and guided by state statute. You must check with your individual state rules. In many states waivers can only be used by owners to elect out of coverage.
  • In some states waivers can be used by independent contractors.

When can waivers be used?

  • The acceptance and use of a waiver depends on the individual state rules. Typically a waiver is used when an owner wishes to opt out of workers compensation coverage.

How are waivers used?

  • When allowed by state rules you’ll find there’s usually some filing requirement where the waiver has to be submitted to the state authority before being effective. Not in all cases.

Waivers mean different things to different people! Some states call them coverage rejection forms while other states call them affidavits. Some states allow them while others don’t. But the single thing to learn from this blog is to be careful with waivers! Make sure you do your homework and know the rules about waivers that apply for your state!

Hope this helps out!

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