A: Every employer with one or more employees is required to maintain coverage (KRS 342.630). There are no special exceptions for family member employees or part-time employees. Out-of-state employers doing any work in this state are required to have Kentucky workers' compensation insurance.

Q: Are there exemptions?

A: Yes. The following are exempted: (KRS 342.650)

(1)  Domestic servants working in a private home of an employer who has less than two employees each regularly employed 40 or more hours a week in domestic servant employment.

(2)  Any person employed by a homeowner to do residential maintenance, remodeling or repair lasting no more than 20 consecutive workdays.

(3)   Individuals performing services for aid or nourishment only from religious or charitable organizations.

(4)   Employees protected by federal law including railroad and maritime workers.

(5)   Persons engaged solely in agriculture (farm laborers).

(6)   Any person covered under workers' compensation, but rejects the coverage.

(7)   Any person participating as a driver or passenger in a voluntary vanpool or carpool program while that person is on the way to or from his place of employment.

(8)   Members of an established religious sect with a conscientious objection to receiving benefits of any public or private insurance.

Q: Do sole proprietors or independent contractors (without employees) need to have workers' compensation insurance?

A: No, they are not required to obtain coverage on themselves.

Q: What are sole proprietors and independent contractors?

A: Sole proprietors are individuals who own and operate a business that is not incorporated. Independent contractors are individuals who work without direction or control and at their own pace. Courts have determined that certain criteria must be met for a worker to be classified as an independent contractor. The major factors are: 

• The nature of the work performed as it relates to the possible employer. Is the work being performed a regular and recurring part of the possible employer’s business? Is the work for a specific project with a beginning and ending date or is it for whatever work becomes available?
• The extent of control of the details of the work. Does the worker furnish all materials and equipment to perform the job task? Does the worker have the right to hire or fire his own helpers without permission from others? Who has final control of the work product?
• Professional skill of the worker.  Does the work performed require a specialized skill, trade or license?
• Intentions of the parties. Is there a written contract that describes the obligations and responsibilities of each party, a specific project described, dates of project and prices agreed upon in advance? What does each party believe?

Other factors considered by the courts are the length of time the service has been performed and potential profit or loss from the venture by the worker. (Any major investment by the worker?) Also is the worker providing the same services for other clients?  Does  the worker maintain a separate place of business, advertise and have a business telephone?

Q: What if I use “contract labor”?

A: A worker is either an employee or independent contractor. Refer to the previous question for the definition of independent contractor. Call the Enforcement Branch with any questions concerning this issue.

Q: What can happen if I do not have workers' compensation insurance for employees?

A: The Office of Workers' Claims can issue a citation resulting in a fine of $100 to $1,000 for each offense. (KRS 342.990 [7] [c]) The penalty can be substantial since each employee and each day of violation shall constitute a separate offense. A court injunction prohibiting the employer from doing business until it comes in compliance can also be obtained. Additionally an employer may be held liable to an injured employee (or employee of an uninsured contractor or subcontractor) for income benefits including lost wages and medical expenses.

Q: Do members of a Limited Liability Company (LLC) or a qualified partnership have to maintain workers' compensation insurance?

A: “Qualified members” of a LLC are treated as owners of a business or “qualified partners” and are not subject to mandatory workers' compensation coverage. “Qualified members” participate in profit or loss as well as the decision-making process of the business. (KRS 342.012) Members may elect to be covered. "Qualified partners" are partners who have entered into a meaningful agreement, which shows that each has contributed to the partnership and will share management decisions. Partners also share any profits or losses. To be exempted, the partnership  must file a copy of the partnership agreement with the Office of Workers' Claims. A LLC or partnership must provide workers' compensation insurance to their employees.

Q:  Is workers' compensation insurance required for officers of a corporation?

A: Yes. KRS 342.640(2) defines an officer of a corporation as an employee. However, corporate officers may exempt themselves from coverage by filing an Employee’s Written Notice of Rejection (Form 4) with the Office of Workers' Claims [KRS 342.395].

Q: What is a Form 4?

A: The Form 4 is the Employee’s Written Notice of Rejection. Its purpose is to allow an employee to reject coverage under the act. Any employee may elect to reject coverage. For the notice to be effective, the original notarized form must be filed with this office. The rejection shall not be effective unless the employee voluntarily makes it. The employee must have a full understanding of the purpose of this form.  Courts have ruled that when all employees file the waiver there is an appearance of coercion and a presumption the form was not signed voluntarily. It should be noted that the Enforcement Branch would investigate when all employees of a business file a Form 4 (excluding businesses with corporate officers only). A citation could be issued to the employer. The filing of this form is not an option of the employer, only the employee.

Q: How do I obtain a Form 4 to file?

A: The form can be obtained by requesting it from the Enforcement Branch or Administrative Services at 502-564-5550.

Q: How do I obtain a copy of a Form 4 filed with Workers' Claims?

A: A copy of a filed form may be obtained by making a written request to the Enforcement Branch providing the employee's name (social security number if available), employer's name and employer's address is included. The request should include a self-addressed stamped envelope and 50 cents per copy (check or money order payable to Kentucky State Treasurer).

Q: Am I required to show proof of coverage?

A: Kentucky statute requires every employer to display a Workers' Compensation Posting Notice conspicuously at its principal office and other locations, where employees report for payroll and personnel matters. [KRS 342.610(6)] The workers' compensation insurance carrier should provide this notice at each policy renewal. This posting must provide current policy information and instructions to employees for reporting workplace injuries.  Contact your insurance agent or workers' compensation carrier for a current notice if you did not receive one with your latest policy.

Q. What is the purpose of an Affidavit of Exemption by Building Contractor?

A: Prior to issuing any building permit pursuant to KRS 198B.650(2) every local building official shall require proof of workers' compensation insurance coverage from the builder before a permit is issued. Any applicant exempt under KRS 342.650(2) must certify to the local building permit official their exemption from workers' compensation coverage. The Enforcement Branch provides two forms for this purpose. One is an affidavit of exemption for corporation or partnership and the other is an affidavit of exemption for individual. These forms are available for download from the Workers' Claims Web site.  (Do not confuse these affidavits with the Form 4.)

Q. Do employees pay any part of the workers' compensation insurance premium?

A:  Kentucky Revised Statute 342.420 specifically prohibits the employer from deducting premium from wages or salary of any employee entitled to benefits.

Q. How do I obtain workers' compensation insurance coverage?

A.  By purchasing a policy from an insurance agent that represents approved insurance companies.

For additional questions, contact the Enforcement Branch at 502-564-5550.