Kentucky workers’ comp 101
Kentucky is home to 355,998 small businesses and 712,477 small business employees. Self-employment has been on the rise nationwide in the last few years, and Kentucky is no exception.
Many people in Kentucky are drawn to small business ownership because it allows them to work in the industry they prefer, whether that’s landscaping, farming, retail, or food. They make their own hours and have total control over their career and work life.
While there are many pros to self-employment and being a small business owner, there’s also lots of responsibility—especially if you have at least one employee working for you.
If you’re considering becoming a small business owner in Kentucky, it’s important to get up to speed on workers’ compensation insurance for small businesses. Know what it is, why you need it, and the dangers of going without it. While it’s recommended that you also carry additional coverage such as general liability, this isn’t required.
Read on to learn how Kentucky workers’ compensation can protect you and your small business, as well as seven essential facts to keep in mind.
What do Kentucky small business owners need to know about workers’ compensation?
In Kentucky, every business with at least one employee or more must provide workers’ compensation insurance. This goes for both part-time and full-time employees.
Workers’ compensation is a state-mandated insurance program that provides medical, disability, survivor, burial, and rehabilitation benefits to employees who are injured, fall ill, or die due to work-related means.
Unlike some states, the workers’ comp law in Kentucky doesn’t have exceptions for family members or temporary and part-time employees. Some occupations, though, are exempt from the state’s mandatory workers’ comp coverage requirements. These include farmworkers, individuals covered by the Federal Act (government employees), and certain religious organizations.
In Kentucky, four factors are taken into consideration to determine whether someone is an independent contractor:
- The type of work the contractor is doing
- The professional skills of the independent contractor
- How much control the employer has over work being performed by the contractor
- The intentions of both parties
These factors may seem vague, which is why it’s important to speak with a trusted advisor. If Kentucky state regulators find that an independent contractor has been misclassified and should instead be considered an employee, you’ll be required to provide them with workers’ compensation insurance.
It’s also important to note that as a business owner, you must include yourself in your workers’ comp insurance policy. Of course, there are a few exceptions:
- You’re a partner in the firm
- You’re a sole proprietor
- You’re a qualified member of an LLC (limited liability company)
Finally, if you’re exempt from needing workers’ comp insurance, it’s recommended you get it anyway. It’s generally a good idea to have it, especially if you face a work-related illness or injury that health insurance may not cover.
6 essential facts about workers’ comp insurance in Kentucky
Kentucky’s workers’ compensation insurance laws require most public and private-sector employers to provide coverage for their employees.
Some employers aren’t required to provide insurance. These include:
- Those who work in the agricultural business
- Employers of two or fewer domestic workers in a private residence
- Certain religious organizations
- Employers of workers covered under federal workers’ compensation programs (e.g., maritime or railroad workers)
- Homeowners employing a residential repair person or maintenance worker for up to 20 consecutive days
Employees eligible to be covered by workers’ comp insurance may elect to reject coverage by signing a Form 4 Waiver (Employee’s Notice of Rejection of Workers’ Compensation Act). To officially reject coverage, the employee must file the form with the Kentucky Department of Workers’ Claims. This can’t be undone unless the form is withdrawn.
Several factors can affect the cost of your workers’ comp insurance, including:
- Your payroll
- Your claims history
- Your coverage limits
- The number of people you employ
- Your industry and risk factors
- Your location
Most workers’ comp insurance policies include employer liability insurance, which helps cover legal fees if your employee blames you for their injury or illness. However, the exclusive remedy doctrine limits the circumstances in which an injured employee can blame their employer for the injury. In most cases, the employee is entitled only to the workers’ comp benefits.
If you fail to carry workers’ comp insurance to protect your employee(s), you could face legal consequences. You could:
- Receive fines of $1,000 per employee per each day they went without coverage
- Be required to close your business until coverage is obtained
- Face jail time for non-compliance
Curious about Kentucky workers’ comp rates?
Every state and situation is different, so becoming familiar with Kentucky’s laws is the best way to keep yourself and your employees safe and covered. In addition to helpful posts like this, talk with a trusted advisor to ensure all your questions are answered.
Please note that this content is intended for educational purposes only. As laws change regularly, refer to your state legislation and/or an advisor for specific legal counsel. If you’re a small business owner, learn more about the basics of workers’ comp or check your current rate in 3 minutes.