Do You Need Workers’ Compensation Insurance for Your Business in Michigan?

If you have a business with employees in Michigan you generally need to carry workers' compensation insurance. According to the Michigan Workers' Compensation Agency you are required to have workers' compensation insurance if you employ three or more workers at any one time, or if during the preceding 52 weeks you have regularly employed at least one employee for 35 hours or more per week for 13 weeks or longer.

Agricultural employers in Michigan must have workers' compensation if they employ three or more workers 35 hours or more per week for 13 or more consecutive weeks. Relatives who work in the agricultural business and live on the premises are not considered employees and do not have to be covered by workers' compensation insurance.

The employees of a partnership or corporation are covered under the workers' compensation law. But the partners or the officers and shareholders of closely-held corporations can exempt themselves from workers' compensation. When all the employees are partners or owners of a small corporation, a certificate of exemption can be obtained from the Michigan Workers' Compensation Agency. This is Form WC-337 and is available from the Compliance & Employer Records Division. It is not available online.

If you operate your business as a sole proprietor, you do not have to carry workers' compensation on yourself, but you would need to have coverage for your employees if required as indicated above. The spouse, children and parents of a sole proprietor may also be excluded.

You are not required to have workers' compensation coverage for independent contractors that do some work for your business. But if you hire a person to do a specific job, disputes can arise as to whether the person is an employee or an independent contractor. According to the Michigan Workers' Compensation Agency, a worker who does not maintain a separate business, does not hold himself or herself out to render services to the public, and does not employ other workers will be considered an employee and not an independent contractor.

Employers can always voluntarily provide workers' compensation insurance coverage for their employees. The advantage to the employer is that work-related injuries or illnesses suffered by workers will be covered, and the employer is protected from lawsuits filed by workers.

Workers' compensation insurance rates are based on classifications of employees according to the type of work they do. According to the Michigan Economic Development Corporation, Michigan has an open competition system for setting workers' compensation insurance rates, and there are more than 300 private insurance companies authorized to sell workers' compensation insurance in Michigan.

Employers that cannot obtain workers' compensation coverage from a private insurance company can turn to the Workers' Compensation Placement Facility. This is a Michigan state-mandated pool in which the risk is shared by all workers' compensation carriers in the state. This pool generally covers new employers and also includes employers who have difficulty obtaining coverage due to hazardous occupations, a history of accidents, or an adverse loss ratio. But as pointed out by the Michigan Economic Development Corporation, this pool generally charges substantially higher rates than the standard market.

Sources:

An Overview of Workers' Compensation in Michigan, Michigan Department of Labor & Economic Growth, Workers' Compensation Agency

WC-337 (06/09) Notice of Exclusion, Workers' Compensation Agency

Workers' Compensation Guide, Michigan Economic Development Corporation