|North Carolina Industrial Commission||May 2008 Update|
For more information about workers’ compensation, see the N.C. Industrial Commission’s Annual Bulletin. See also Frequently Asked Questions, Questions for Insurers, and Questions for Medical Providers.
This page was last updated 19 March 2009.
The following are answers to some of the most commonly asked questions by business and industry about North Carolina Workers Compensation:
Q: I am getting ready to open my own business. Am I required by law to carry workers compensation insurance?
A: In order to determine if you are required by law to carry workers compensation insurance, you must first determine your business entity, i.e., sole proprietorship, partnership, limited liability company (LLC), corporation, agricultural operation, business with radiation, estate, trust, etc.
If you are a sole proprietorship, partnership, LLC, estate, or trust, you are required by law to carry coverage once you have three (3) employees who are regularly employed, in addition to the sole proprietor, partners, formulators of the LLC, executor of the estate, and bearer of the trust. It does not matter if these employees are full time, part time, regular seasonal or family members.
If you are incorporated, including all forms of corporations and those which have non-profit status, you are required by law to carry coverage once you have a total of three (3) people in the corporation. Everyone is included in the headcount, including corporate officers.
Businesses with radiation are required by law to carry coverage when they have one (1) employee. An agricultural operation must carry coverage when there are ten (10) or more regular, non-seasonal employees. Any other business entity not mentioned above would use the three (3) or more employees rule.
Q: Where do I get workers compensation insurance?
A: There are four (4) markets of coverage available in North Carolina.
(1) You may qualify to become self-insured. To receive information on this process, contact the Department of Insurance toll free at (800) 546-5664 (in North Carolina) or (919) 807-6750 (outside of North Carolina).
(2) Your business may be placed in a self-insured fund. In order to receive a list of the self-insured funds in North Carolina, contact the Department of Insurance toll free at (800) 546-5664 (in North Carolina) or (919) 807-6750 (outside of North Carolina).
(3) You may find coverage in the conventional and open market. In order to do so, contact an independent insurance agent and request his/her assistance in providing your business with coverage.
(4) You may be placed in the assigned risk pool which is administered by the N.C. Rate Bureau. You may contact them directly for information at (919) 582-1056 or you may ask your insurance agent for information.
Q: How much does it cost?
A: The cost varies depending upon your market of coverage. There are rates for each specific type or classification of employment. These rates are applied on a percentage basis. The percentage is applied to per one hundred ($100.00) dollars of payroll. You may contact your insurance agent to receive these rates and/or the N.C. Rate Bureau at (919) 582-1056.
Q: Do I have to be covered under my own policy?
A: As a corporate officer, sole proprietor or partner, you may choose to exempt yourself from coverage under your policy or elect to have yourself covered. In some situations, general contractors may make it a condition of employment for subcontractors to be covered. Subcontractors should discuss this with general contractors upon being hired.
Q: If I am a corporate officer, owner of a business, or partner, and I want to be covered under my workers compensation insurance policy, is my entire payroll taken into consideration for premium?
A: No. There are maximum amounts of payroll which can be taken into consideration for the setting of premium for sole proprietors, partners, formulators of an LLC and corporate officers. Contact your insurance agent for these amounts or the N.C. Rate Bureau at (919) 582-1056.
Q: I am a general contractor. Do I have to have workers compensation insurance?
A: Yes, if you have three (3) or more employees. However, you may want to contact the builders permit licensing department to see if you must carry coverage regardless of the number of employees you have in order to obtain a builders permit.
Q: As a general contractor, am I responsible for covering my subcontractors?
A: If the subcontractor has one or two employees, there is liability on the part of the principal contractor for those employees but not that of the subcontractor. Waivers are no longer necessary since N.C. Gen. Stat. §97-19 declared that principal contractors are not responsible for subcontractors, only their one or two employees.
Any principal contractor, intermediate contractor, or subcontractor who sublets any contract to a subcontractor without first obtaining documentation that the subcontractor is in compliance with the N.C. Workers Compensation Act is liable for payment of compensation and other benefits if any employee of the subcontractor is injured or dies due to an accident arising out of and in the course of the performance of the work covered by such subcontract. If the principal contractor, intermediate contractor, or subcontractor obtains proper documentation at the time of subletting the contract to a subcontractor, he will not be held liable to any of the subcontractors employees for compensation or other benefits. The principal contractor, intermediate contractor, or subcontractor may require documentation of workers compensation coverage regardless of whether the subcontractor regularly employs fewer than three employees.
Q: I am a subcontractor. Do I have to carry coverage if I have no employees?
A: Not if the general contractor who hires you does not require coverage as a condition of employment of affording you the opportunity to work. If so, you would either need to produce a certificate of insurance for the general contractor or allow the general contractor to deduct workers compensation from what he pays you to do the work.
Q: Are there waivers of workers compensation coverage in North Carolina?
A: No. Waivers are no longer valid in North Carolina and have not been since October 1995.
Q: I am an employer and file "1099s" on a lot of people who work for me. What does this mean for workers compensation?
A: Just because you "1099" for IRS purposes does not mean that those people would be considered independent contractors under the N.C. Workers Compensation Act. If you as the employer exercise "right to control" over those individuals by governing the manner and method in the way in which they do their job, then they may be considered employees under the N.C. Workers Compensation Act. (See N.C. Gen. Stat. §97-2 Case Notes - Independent Contractors.)
Q: Can any insurance agent get coverage for me?
A: No. You need to contact a licensed insurance agent. You may want to start by contacting the agent you use for other forms of insurance. If they are unable to assist you, they should be able to put you in contact with an agent who does place coverage or write workers compensation insurance.
Q: What are the penalties for not carrying workers compensation insurance coverage?
A: Pursuant to N.C. Gen. Stat. §97-94(b), employers not in compliance with the Act may be subject to penalties between $50.00 to $100.00 for each day of non-compliance until proper coverage is obtained.
Q: I am an employer and have a question about my experience modification for my business.
A: Contact the N.C. Rate Bureau at (919) 582-1056 or your insurance agent.
Q: I am an employer. Who can I talk to about a complaint regarding the payroll audit for my workers compensation premium?
A: First, you should contact the Underwriting Division and the Auditing Division of the insurance company who writes your policy. Additionally, you may contact the N.C. Rate Bureau at (919) 582-1056 or the Department of Insurance Consumer Services Division. Callers in North Carolina may contact the Consumer Services Division toll free at (800) 546-5664. Out-of-state callers may reach Consumer Services at (919) 807-6750.
Q: I have a workers compensation insurance policy and want to cancel it. What do I do?
A: Contact your insurance agent as well as the insurance company who writes your policy.
Q: I am an employer. What do I do if I think someone is trying to commit fraud?
A: Contact the N.C. Industrial Commissions Fraud Investigation Unit toll free at (888) 891-4895 (in North Carolina).
For more information, see the N.C. Industrial Commission’s Annual Bulletin.
See also Frequently Asked Questions, Questions and Answers for Insurers,
and Questions for Medical Providers.