Most states require Workers Compensation to cover injuries to employees while working. One location entities with no remote workers don’t have much to think about in regards to location. The primary driver of coverage is the “3.A” state listed on the declarations page. Insurers like to know the actual location addresses but the main driver of coverage is the listed state.
Why the State is Important
State laws dictate workers compensation coverage. Rules, laws and payment amounts vary from state to state. Insurers use the rates in a particular state to calculate premium. When the coverage and the premium do not match, this causes problems. Workers compensation policies are very uniform but defer to state rules and regulations when it comes to actual administration and claim payments.
Workers compensation insurance policies grant coverage to covered states. For example, a company based in CA with employees in CA will by default give CA coverage requirements. However, if this company hires an employee in FL, then FL workers compensation laws apply, not California’s. Therefore FL should be listed on the policy information page but what happens if it is not?
Other States can be covered if the insured forgets to notify their insurance company. This is literally called “Other States” coverage and allows the policy to pay claims as long as the state was added after the effective date of the policy (in which the new state was added) but there is a catch. Once that policy expires and move to the renewal term, the insured has 30 days to notify their insurance company of the new state. Failure to do so, in our example, means the FL employee will no longer be covered.
In essence, you can forget to add the state in the current policy term but continuing to forget can put your company on the hook for employee injuries.
Marketing, sales and administrative functions are key areas to watch. Many specialty food and beverage companies hire employees in other than their home state for these functions. Sales is especially common due to territory coverage. Pay particular attention to your hiring practices in these areas. Injuries sustained while working for home are not common but sales people travel and that adds risk.
If you company uses a payroll company for workers compensation, they may pick up on a new address for you but don’t count on it. The list below should be reviewed when hiring in a new state:
- Filing with Department of State
- Setting up Unemployment Benefits
- Does the new state require employer sponsored Disability Insurance?
- Sales Tax registration
- Workers Compensation
Technology really opens up the hiring game but before you jump at a great candidate in another state, do your homework.