Workers’ Comp Insurance Requirements by State: A Guide for Brokers

Workers’ compensation may be governed at the state level, but its impact lands directly on the brokers, CPAs, and trusted advisors who guide growing businesses. When a client hires in a new state, brings on remote staff, or expands into a regulated industry, the rules can shift overnight along with their exposure. 

Understanding the most important state-level differences helps you protect your clients from fines, lawsuits, and operational surprises before they happen.

Here’s what this guide covers:

• The baseline workers’ comp rules most states share
• The high-impact states where requirements diverge
• How to frame workers’ comp risk in clear, practical terms
• Where a PEO can help simplify multi-state compliance

With that foundation in place, let’s look at the common ground most states share.

How Should Brokers Talk About State-Specific Workers’ Comp Risk With Clients?

The simplest way to discuss state-by-state differences is to frame them as risk, not red tape. Clients respond when you show how coverage rules vary across borders and how quickly penalties or lawsuits can follow a coverage gap.

State laws aren’t uniform. Some require workers' comp for one employee, others for three or four. A few impose daily fines for non-compliance, and Texas allows private employers to opt out entirely (while exposing them to lawsuits if someone gets hurt). When you explain these contrasts clearly, clients understand why workers’ comp decisions can’t be left on autopilot.

Before making recommendations, walk clients through a few quick checkpoints:

• Where do employees work? Coverage follows location, not headquarters.
• How many people work in each state? Thresholds differ.
• Any high-risk roles? Construction, healthcare, logistics, and field work trigger unique rules.
• Any remote hires? Remote staff still activate state-specific requirements.

These checkpoints provide a clear overview of exposure and outline the next steps.

Closing the conversation with a simple reminder of these nuances helps clients see workers’ comp as an ongoing strategy rather than a one-time purchase.

What Do Most States Require When It Comes to Workers’ Comp?

Across the country, most states follow the same core framework: once a business hires employees, workers’ compensation becomes mandatory. The details vary at the edges, but the foundation is consistent enough that brokers can treat it as a reliable baseline.

At its core, workers’ comp exists to protect both employees and employers. It covers medical care and wage replacement after a work-related injury while shielding businesses from costly lawsuits. Nearly every state ties the requirement to employee count, usually beginning with the first non-owner hire. Exemptions exist, but they’re narrow and rarely apply to growing businesses.

Before digging into state-specific nuances, it helps to anchor clients in the common rules seen nationwide:

• Coverage starts early. Most states require comp for one employee.
• Owners can often opt out. Certain corporate officers and partners may exclude themselves if they meet statutory criteria, but employees must be covered.
• Penalties are steep. Fines, stop-work orders, and exposure to lawsuits are common enforcement tools.
• Classification accuracy matters. Accurate job and payroll information, provided by the employer, is essential to avoiding audits and penalties.

These shared principles give clients a clear starting point. From there, state-specific differences become easier to understand and manage.

Which States Have Workers’ Comp Rules Brokers Can’t Afford to Miss?

Some states follow the national pattern. Others break it entirely. For brokers, these outliers matter because they reshape a client’s risk profile the moment they hire, expand, or open a job site in that state. 

The states below stand out for their penalties, thresholds, or unusual rules.

California: Mandatory Coverage at Employee #1

California is one of the strictest states in the country. Coverage is required as soon as a business hires any employee, full-time, part-time, or seasonal. Penalties for operating without insurance include fines, stop-work orders, and even misdemeanor charges.

Recent state changes matter too. Contractors renewing licenses must now confirm the workers’ comp classification codes tied to their policies, and certain high-risk trades can’t claim coverage exemptions even if they have no direct employees. These rules often surprise smaller firms, which means brokers play an essential role in prevention.

Before advising any California client, run a quick compliance scan:

• Any W-2 staff? Coverage is immediately required.
• High-risk trades? Exemptions may not apply.
• Correct class codes? Misclassification drives audits.

These checkpoints keep conversations focused and practical.

Texas: Optional Coverage That Isn’t Low-Risk

Texas is the only state where private employers can decline workers’ comp altogether. On paper, this sounds flexible. In reality, it exposes employers to direct lawsuits if an employee is injured. Non-subscribers must notify employees and often secure alternative occupational policies, but none offer the same legal protections as statutory workers’ comp.

For brokers, the angle is simple: opting out shifts the full financial burden of workplace injuries onto the employer. One serious claim can exceed years of premiums. Contractors working government jobs also face mandatory coverage requirements, a nuance many SMBs miss.

Position the Texas conversation around choices and consequences. Clients appreciate clarity more than persuasion.

Florida: Strict Thresholds and Construction Oversight

Florida uses a split system. Most industries must carry workers’ comp once they reach four employees. Construction firms, however, trigger the requirement for one employee. Corporate officers can sometimes exempt themselves, but only if they meet strict ownership and filing criteria.

For out-of-state contractors, Florida adds another wrinkle: they must carry Florida-compliant coverage while working within the state. Brokers should flag this for clients expanding into new regions or taking short-term jobs on Florida sites.

A quick Florida review checklist helps speed up conversations:

• Industry type? Construction rules differ.
• Employee count? Four employees trigger coverage for most.
• Out-of-state work? Florida requires in-state compliance.

SMBs often underestimate how quickly they cross compliance thresholds here.

New York: Universal Coverage and Aggressive Enforcement

New York requires workers’ compensation for virtually all employees, including part-time workers and family members. The state also imposes steep fines for lapses, calculated in 10-day increments that add up fast. For brokers, this makes policy continuity a critical talking point.

New York’s workers’ comp rules also include industry-specific payroll caps for premium calculations. These details affect cost expectations and classification accuracy (two topics clients care about deeply).

Brokers should reinforce one message: in New York, comp coverage gaps are expensive. A simple renewal calendar or automated reminder system can save clients thousands.

Illinois: Daily Fines for Missing Coverage

Illinois mandates workers’ comp for employers with even a single employee and aggressively enforces compliance. Penalties are imposed per day, with significant minimum fines. That structure alone makes coverage lapses more financially damaging than in most states.

For brokers, the strategy is straightforward: drive home the cost of inaction. Encourage clients to proactively review employees, job duties, and headcount changes. When it comes to workers’ comp, Illinois is unforgiving to businesses that “get to it later.”

Monopolistic States: When the State Is the Only Carrier

Ohio, North Dakota, Washington, and Wyoming require employers to purchase workers’ comp through state-run funds. Private carriers cannot write the core coverage there. Multi-state employers often need separate arrangements for monopolistic and non-monopolistic states, which adds operational complexity.

Brokers still play a role by helping clients register correctly, understand claim processes, and secure stop-gap liability protection through other policies.

These state spotlights give clients a clear picture of where rules tighten, where they differ, and where the risks rise fastest. The sharper the guidance, the easier it is for clients to stay ahead of compliance and avoid chasing it.

How BBSI Helps Brokers Navigate Workers’ Comp Insurance Requirements by State

State-specific workers’ comp rules shift quickly, and the differences between California, Texas, Florida, New York, Illinois, and the monopolistic states can reshape a client’s risk overnight. For brokers, understanding these patterns is essential for safeguarding the businesses you advise. 

A PEO like BBSI helps simplify multi-state compliance, align coverage with changing headcounts, and support clients as they expand into new locations or industries.

If you have questions or want deeper guidance on state-by-state workers’ comp strategy for your clients, reach out to your local BBSI representative. We’re ready to help.

Key Takeaways

This guide breaks down the key workers’ comp insurance requirements brokers encounter when their clients operate across multiple states. It highlights the baseline rules most states share, then examines high-impact states—California, Texas, Florida, New York, Illinois, and the monopolistic states—where requirements diverge and risks rise. 

The blog explains how to frame workers’ comp in practical, risk-focused terms, outlines simple checkpoints brokers can use during client conversations, and concludes by showing how a PEO like BBSI simplifies multi-state compliance and reduces administrative strain.