Does Your Florida Business Require Workers’ Comp?

Does Your Florida Business Require Workers’ Comp?

In Florida if your business is not in the construction industry and you have four or more regular employees you are required by law to have workers’ compensation insurance.

Whether a person working for your business qualifies as an employee for workers’ compensation purposes and whether an owner or worker qualifies for an exemption is an assessment to perform with your attorney before you receive a stop-work order or records request from the Division of Worker’s Compensation of the Department of Financial Services.

Take the opportunity to assess your coverage obligation now

This article is designed to inform business owners of the workers’ compensation insurance requirements in Florida so they can determine if they need to evaluate their business for coverage or obtain coverage. This article is not intended to analyze any particular business nor does it address the workers’ compensation claims process.

The time for any business to determine whether it is obligated to have workers’ compensation insurance in place is before the Division imposes a stop-work order, initiates an investigation, or imposes penalties on the business. Like most business matters being proactive on a legal requirement such as workers’ compensation insurance can save the business a great deal of money later.

Construction industry versus non-construction industry

Under Chapter 440 in the Florida Statutes known commonly as the Workers’ Compensation Law there is a significant difference and distinction between businesses involved in the construction industry and those that are not.

Under Section 440.02(8) in the Workers’ Compensation Law the definition of the construction industry includes businesses that build structures and clear, fill, or excavate land. Rule 69L-6.021 of the Florida Administrative Code contains a comprehensive list of construction industry classification codes on which the Worker’s Compensation Division relies to determine if a business is in the construction industry.

Non-construction industry businesses are all those that do not fall within the definition of construction with the exception of agricultural businesses. The distinction logically being that construction industry operations have a greater risk of exposing workers to injuries as compared to other businesses. Therefore construction businesses with one or more employees including the owner must have workers' compensation coverage in Florida.

Am I exempt as the business owner from worker’s compensation requirements?

Business owners can exclude themselves as employees of their business for purposes of worker’s compensation but they are not automatically exempt. Managers or members of a limited liability company depending on whether it is manager-managed or member-managed and directors and officers of corporations may file a Notice of Election application online with the Division to exempt themselves from the insurance requirement.

Florida’s Workers’ Compensation law defines the scope of the corporate officer for an LLC or corporation in Section 440.02(9). It clarifies that a member who holds at least a 10 percent interest in a limited liability company may qualify as a corporate officer for exemption purposes. The exemptions are issued to the individual not to the business so the application should be made by the individual corporate officer.

How do I know if I have four or more employees if I use independent contractors

Section 440.02(5) within the Workers’ Compensation Law defines an employee as one who receives payment from the employer for any work under any form of agreement whether oral or written. That means that for workers’ compensation purposes an employee is defined very broadly.

The term employee under Florida’s Workers’ Compensation Law does not include an independent contractor outside of the construction industry as the Workers’ Compensation Law defines that industry. But in order to qualify as an independent contractor for those purposes some elements must be present such as the contractor must be a separate business and have its own equipment, must have a Federal EIN number, must receive payment to the business, should have a bank account in its name, can have the freedom to work for others, and could have bid on the work to be performed.

Even if the initial criteria delineated by the Workers’ Compensation Law to qualify a worker as an exempt independent contractor are not sufficiently present the person may still be considered exempt from the requirement to obtain workers’ compensation insurance. For example if the contractor performs work for a specific amount of money and controls the method by which the work is performed or is responsible for the expenses related to the performance of the work then they may still be an exempt independent contractor.

Additionally if the party performing the work is responsible for completing the work, is on a commission basis, or makes a profit on the work performed, then the individual can still be considered an exempt independent contractor for workers’ compensation purposes. With regard to those who work on commission Florida’s Workers’ Compensation Law makes it clear at Section 440.02(15)(d)(2) that a real estate agent working on commission is not considered an employee for workers’ compensation purposes.

What is the effect of failing to obtain workers’ compensation insurance in Florida

There are three significant impacts to a business that fails to obtain workers’ compensation insurance what it is required to do so. The first is that it will have to obtain such insurance quickly that may result in a substantially more expensive premium then had the business obtain the insurance at an earlier time.

The second impact to a business that must and fails to obtain workers’ compensation insurance is that it may incur expenses in responding to Division requests for information or even from a stop-work order. If a business violates a stop-work order it becomes liable for a penalty of $1000 per day under Section 440.107.

Lastly an employer that fails to obtain or maintain workers’ compensation insurance when legally required to do so may not defend any lawsuit for an employee’s injury or death on the basis that the injury was caused by the negligence of another employee, that the employee assumed the risk of the injury, or that the employee’s own comparative negligence contributed to the injury. The effect of this part found at Section 440.06 in Florida’s Workers’ Compensation Law may make it next to impossible for the business to defend an injury claim by an employee.

What should your business do if you are investigated

The Division will generally send a request for production of business records to obtain the necessary information to evaluate whether your business is required to or does have proper workers’ compensation insurance. Working with your business attorney you can produce the necessary records with confidence that those are all confidential under Florida law.

Probably the worst decision your business can make is to not respond to a request for production of business records as it will likely lead to a stop-work order. In the event that the Division issues such an order before or after a records request you should contact your business attorney immediately upon receipt of that order.

Even if your business is required to have a workers’ compensation insurance policy in place and fails to do so your business can still qualify for penalty reductions and credits. The Division will credit the amount your business pays for its policy premium. Also if your business meets certain requirements such as timely providing requested records it can even qualify for an additional 25 percent discount of the penalty that the Division will assess.

The takeaways on workers comp for your business

Certain businesses in Florida are required by law to have workers’ compensation insurance. Failure to do so may result in financial penalties greater than the expense of simply obtaining the insurance.

Waiting until the Division of Worker’s Compensation of the Department of Financial Services investigates your business and determines that it was required to and failed to obtain the appropriate coverage is not the best time to evaluate that requirement. The take away here is to save your business money by proactively evaluating whether you need workers’ compensation insurance and to obtain that coverage if you do.

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