Article Reviewed by a licensed insurance professional: Sam Meenasian (CA dept of insurance license #0F75955).
Estimated reading time: 6 minutes
Running a construction business is not just about bids, blueprints, payroll, and deadlines. Once you start working across state lines, workers’ compensation gets more complicated because every state has its own coverage rules, exemption rules, proof requirements, and penalties. In some states, a mistake can trigger license suspension. In others, it can lead to a stop-work order, civil penalties, contract issues, or more lawsuit exposure.
California
If your California construction business has even one employee, workers’ compensation is generally required. California also requires certain contractor classifications to carry coverage even with no employees. Those classifications are C-8 Concrete, C-20 Warm-Air Heating, Ventilating and Air-Conditioning, C-22 Asbestos Abatement, C-39 Roofing, and C-61/D-49 Tree Service. If you let required coverage lapse, CSLB says the license can be suspended. If you filed a no-employee exemption and later hire employees, proof of coverage must be submitted to CSLB within 90 days.
California also added a renewal requirement that many contractors miss. As of July 1, 2024, a contractor with a workers’ compensation certificate on file with CSLB must list up to the top three classification codes tied to the highest estimated payroll on the policy when renewing. CSLB has also said the wider workers’ compensation requirement for all licensees is currently delayed to January 1, 2028, for most trades.
Texas
Texas is different from the other big contractor states. Most private employers are not required to carry workers’ compensation, which is why you hear the term non-subscriber so often. But that does not mean there is no risk. If a private employer contracts with a government entity, Texas requires workers’ compensation coverage for the employees working on that project. Some general contractors and project owners also require subcontractors and independent contractors to carry coverage before they are allowed on site.
Going without coverage in Texas can create real legal exposure. If you carry workers’ compensation, the policy limits your liability in most employee injury lawsuits, except in fatality cases involving gross negligence. If you do not carry it, an injured employee can sue, and Texas says you lose important common-law defenses. Non-subscribers also have reporting duties and must report certain work-related injuries, illnesses, and deaths to the state.
Florida
Florida is strict for construction employers. If your construction business has one or more employees, workers’ compensation is required. Florida construction rules also treat corporate officers, LLC members, sole proprietors, partners, and independent contractors as employees unless a valid exemption applies. That is one reason Florida catches contractors off guard. The headcount rules are broader than many owners expect.
Florida exemptions are narrow and specific. In construction, the exemption is issued to the individual officer or LLC member, not to the business itself. The entity must be active with the Florida Division of Corporations. The applicant must meet the ownership requirement, which is at least 10 percent, and construction exemptions are limited to three officers or members across affiliated entities. The person who elects the exemption cannot recover workers’ compensation benefits for their own work injury.
Florida also has special rules for out-of-state contractors. If employees from another state will work in Florida, the employer generally must obtain a Florida policy or have Florida added to Section 3.A. of the home-state policy. Florida also recognizes limited reciprocity for temporary work in some situations, generally no more than 10 consecutive days and no more than 25 total days in a calendar year. If required coverage is missing, Florida can issue a stop-work order and assess a penalty tied to the unpaid premium.
New York
New York is closer to California and Florida than Texas in overall strictness. Most employers with one or more employees need workers’ compensation coverage. A sole proprietor with no employees is generally not required to buy it, and some no-employee partnerships, LLCs, LLPs, and certain one- or two-person owned corporations may also fall outside the mandatory rule. Business owners can still choose to include themselves voluntarily.
CE-200 is one of the most misunderstood forms in New York. A CE-200 is only for a government permit, license, or contract when the applicant is not required to carry coverage. It is not a substitute for a workers’ compensation policy, and it cannot be used to answer a Board penalty notice or prove exemption to a private business or insurance carrier. For building permits, CE-200 is job-specific. New York also says out-of-state employers with employees working in New York must carry a full statutory New York policy.
Penalties in New York are serious. The Workers’ Compensation Board can assess up to $2,000 for every 10 days without required coverage. Its business-owner guidance also says that failing to carry coverage for more than five employees is a felony, while five or fewer is a misdemeanor. The Board can issue stop-work orders, and uninsured employers may be personally liable for benefits and medical costs.
What affects price
When you budget workers’ compensation, do not think in terms of one average state price. Premium is usually built from payroll, classification code, and experience modification. Carriers apply a rate to each class code per $100 of payroll, and the final premium is reconciled after audit using actual payroll. That is why roofing, concrete, tree work, and clerical payroll can price very differently.
What multi-state contractors should check before starting work?
Before you start a project in another state, verify the employee threshold, confirm whether any special contractor classification must carry coverage even with no employees, check whether the policy needs that state listed or endorsed, and collect proof of coverage or a valid exemption from subcontractors before they begin work. Florida specifically tells contractors to verify subcontractor coverage before work starts, and New York warns that workers labeled as subcontractors can still be treated as employees in a claim, which can push premiums and liability back to the general contractor if proof is missing.
The bottom line
Workers’ compensation is not just another insurance box to check. For contractors, it affects licensing, bids, subcontractor management, lawsuits, and cash flow. The safest approach is to match the policy to the work you actually do, keep class codes accurate, keep coverage continuous, and re-check state rules every time you add a new state or a new trade.
Need help sorting out class codes, state listings, proof of coverage, and multi-state contractor requirements? USA Business Insurance can help you compare workers’ compensation options for your operations and budget. Call 888-900-0205 or request a quote online to get started.
