Business owners and work comp in Arizona
The format will be question and answer.
Let's jump right in.
(Oh, first, the standard disclaimer: I'm an insurance agent. I can be reached at 480-940-0909. I'm not a lawyer. You should not make decisions on this information without consulting an insurance agent and your attorney. Coverage cannot be bound based on this article. ~Joe)
What is Workers' Compensation in Arizona?
Premiums are paid by the employer. Workers' Compensation was created in part to ensure that employees got immediate financial help if they were hurt on the job, and employers had some protection from lawsuits due to work-related injuries.
Workers' compensation in Arizona is regulated by the Industrial Commission of Arizona.
Am I required to carry work comp in Arizona?
Yes, you are required to carry workers' compensation, even if you have only one employee.
(This is authorized by Arizona Statute A.R.S. § 23-901. Scroll down to Chapter 6 to see all the sections. And if you really like detail, you can read the 101 pages of Arizona Workers' Compensation Administrative Code. Have a lot of coffee ready.)
In short- the Arizona Legislature has required this coverage, even for one employee.
Are there any exceptions?
In Arizona, you are not required to carry workers' compensation on yourself if you are a sole proprietor without employees.
You are also not required to provide workers' compensation in Arizona for working partners, very infrequent workers ("both casual and not in the usual business of the employer"), domestic servants, and independent contractors. But see the question below where I discuss the risk of assuming someone is an independent contractor.
What if I have no employees at all?
Can I "self insure" instead of buying work comp?
What if my employees are not full-time?
Any and all employees, regardless of status, must be covered by work comp in Arizona.
What about independent contractors?
BUT BE CAREFUL. I wrote an article about the definition of independent contractor, and many business owners think that they're safe by calling a person an "independent contractor."
However, calling someone an independent contractor does not necessarily make them one.
In disputes after someone gets hurt on the job, the courts decide if that person you have doing things for you is an employee or not. They base it on a "totality of facts." If the court decides that the injured "independent contractor" is an employee- you could be in trouble.
In short: if it looks like an employee, it probably is.
Is Arizona a "no fault" work comp state?
What does that mean?
No matter who or what causes the illness or injury at work, workers' compensation pays.
It doesn't matter if the employer left a banana peel on the floor, or if the employee was just careless when he dropped the hammer on his foot. Work comp handles the claim.
Of course they are a few exceptions (consult an attorney for details). One of the most common exceptions is in cases of "purposely self-inflicted" injury.
What happens if I don't carry work comp?
This may scare you (it should)... you would be guilty of a Class 6 felony. (A.R.S. § 23-932)
Are you going to jail? Probably not. Are you in trouble? Yes.
In addition to your employee being able to sue you in some cases (this gets into legal weeds, so consult an attorney for the details), you are also subject to a civil fine of $1,000 for the first offense, $5,000 for the second offense, and a $10,000 fine for the third offense.
If an employee is injured, they would still be covered- just not by your workers' compensation. Instead, they'd be covered by the Industrial Commission of Arizona (ICA). The ICA has a special fund to process work-related illness or injury claims when the employer has no workers' compensation coverage.
Then the ICA comes after the employer for reimbursement.
Finally, and this is a big thing... the State of Arizona could shut down your business with a court injunction if you refuse to get the required workers' compensation insurance.
It's just not worth the risk.
What are my employer obligations?
- You must publicly post employee rights.
You must post, in writing and in a public place, the rights of an employee to accept or reject workers' compensation coverage. The form is here.
- You must not demand that an employee waive coverage.
Even though an employee may voluntarily waive their right to participate in workers' compensation, do cannot ask or pressure them to waive that right.
- You must provide an employee with certain information in the event of an incident.
If an employee is injured on the job, or if they report to you that they have an illness or injury related to the job, you must provide them immediately with the name of your workers' compensation carrier, the policy number, and the policy expiration date.
- You must report a work-related illness or injury within 10 days.
The Industrial Commission of Arizona requires that you report the disease, illness or injury to your workers' compensation carrier and to the ICA within 10 days. You can download the form here, or in fillable pdf format here.
- You must report certain injuries more quickly.
The Arizona Division of Occupational Safety and Health (ADOSH) has additional reporting requirements. Here they are:
-Work related fatalities, report within 8 hours.
-In-patient hospitalizations, amputations and any eye losses, report within 24 hours.
Visit their page for details on reporting, or call (855) 268-5251.
- You must never punish an employee for a claim or lawsuit.
If there is a claim for a work-related injury or illness, be careful to not do anything that can be seen as punishment or a reprisal. Watch your words and actions.
- You must cooperate with investigators.
If one of your workers files a work comp claim or a lawsuit against you for a work-related illness or injury, cooperate with all investigators. Don't withhold any information, and most importantly, contact your attorney and your insurance agent.
These aren't just good ideas. They are business-saving obligations. There are many attorneys in Arizona ready and willing to come after you if you don't do what's required.
Can I be sued after work comp settles a claim?
According to the Industrial Commission of Arizona (ICA),
"in most instances, workers compensation is the exclusive remedy against an employer that is insured for workers’ compensation."
But that doesn't mean you are always in the clear after a work-related claim.
In the case of an employee who has voluntarily opted-out of workers' compensation, you could be sued for financial damages related to the illness or injury sustained at work. This is a good reason to discuss all possible scenarios with your attorney and your insurance agent.
Finally, if the employer has not followed the legal requirements for posting employee rights to accept or reject work comp coverage, or if the employer or another employee has engaged in "willful misconduct" then the employee may be able to file a lawsuit.
Where can I buy workers' compensation in Arizona?
If all else fails, the NCCI (National Council on Compensation Insurance) administers an "Assigned Risk Plan" for the State of Arizona for those employers that cannot otherwise qualify for work comp coverage through any other carrier.
YOUR FIRST OPTION should be to work with an experienced and local insurance agent who has knowledge of the ins and outs of workers compensation in Arizona.
Why should I choose a local insurance agent?
An experienced local insurance agent can take the time to make sure that every "i" is dotted and every "t" is crossed. You can't afford to miss anything. Workers' compensation insurance isn't just an afterthought- it's essential to the survival of your business. A local agent sits down with you to make sure that you do this right.
A local insurance agent partners with a company that they've chosen to provide complete workers' compensation protection, including a dedicated team of specialists to hold your hand through any claims that arise. You need simple if something happens.
MOST IMPORTANTLY, you have ONE PERSON TO CALL for any questions. Your local agent partners with you so you don't have to be the expert. You've got a strategic partner.
Are there preferred industries?
Any employer can get workers' compensation insurance in Arizona, and I'd be glad to help you find coverage, regardless of your business.
However, the company that I represent, Farmers Insurance, specializes in certain industries.
If your business fits one of these categories, call me before checking elsewhere. I've got the experience to help, and I can offer a very competitive quote.
- Apartment Owners
- Auto Service and Repair
- Commercial Real Estate
- Home and Building Service
- Professional Service
- Religious Organization
Questions? Call me, Joe Baselice, at 480-940-0909.