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Workers' Compensation is Required for All Employees

Workers' Compensation is Required for All Employees
Pat Dickson - Mon May 14, 2012 @ 04:43PM
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If you do business in Arizona and have one (1) or more employees, you must provide them with workers' compensation insurance coverage. All employees must be covered, including full-time and part-time workers, family members involved in the business, and minors just helping out. It is the law. It doesn't matter if you are a new business, a sole proprietor, a partnership, LLC, or corporation. Your employees must be covered too. There are exceptions, but not many. For small businesses, especially those run and operated by sole proprietors or owners, there may be an alternative answer. Independent contractor agreements can be a solution during seasonal or heavy workloads. However, the written requirements are strict, as provided in Arizona Revised Statutes 23-902.


Workers' compensation is insurance you provide your employees that covers work related injury, illness, or disability. Such traumas may be the result of a single occurrence, for instance an electric shock. Multiple occurrences or exposures may be covered, such as typing day after day with resulting carpal tunnel syndrome. In most cases, in return for providing this coverage, you and your affected employee aren't allowed to sue one another in court. As a matter of law, no one is considered at fault. Your employee keeps her job. She keeps her claims limited to the coverage provided by the workers' compensation policy limits in place. There are exceptions, e.g. when the employer or employee has caused the trauma through reckless or willful behavior. Also, having a workers' compensation policy in place will usually not protect you when: 1) Your employee has opted out of coverage, or 2) You have failed to give her the proper legal notice of her right to opt out. 


In most cases, an employee's job is protected. You cannot fire her for any work-related incident leading to her injury, illness, or disability that does not involve her intentional behavior. Remember, coverage is generally no fault. If her claim is approved by your carrier, she may receive a portion of her salary during her convalescence, including payment of medical bills. When she has recovered, her old job, or an equivalent job, will be available. If she is unable to perform her old duties due to the nature of her affliction, the costs of training for suitable and equivalent job duties may be covered. If she does not recover, she may be entitled to permanent disability benefits.


There are at least four (4) places to find coverage:

1. You may self-fund your program. You start by filling out the Application with the Industrial Commission of Arizona. A few of the general qualifying guidelines are an annual payroll of at least two-million dollars ($2m) per year, fifty-million dollars ($50m) in assets, and having been in business for at least five (5) years.

2. You can go to the List of approved workers' compensation carriers and get a few quotes. It is always my opinion that getting at least three (3) quotes is prudent.

3. You can go to SCF Arizona and get a quote. See if SCF Arizona can beat any of the quotes you obtained from the above-referenced carriers.

4. If you can't find coverage through a listed carrier or SCF Arizona, for whatever the reason you are rejected, you may be able to obtain coverage through the Assigned Risk Pool.


If you fail to provide coverage, your business could be shut down. You are open to lawsuits with no damage ceilings. The Insurance Commission of Arizona's Special Fund Division will cover any valid employee claims. It will then come after you, seeking full reimbursement plus 10%. There are additional potential fines. Worst of all may be your being charged with a Class 6 felony.

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