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In almost every U.S. state, employers are required to carry workers’ compensation insurance if they have a certain number of employees. If you’re a business owner in Colorado, you’ll need to purchase workers’ comp insurance if you have at least one employee that doesn’t meet the state’s exemptions criteria.
In this article, we’ll go over who you need to cover, who is exempt, and possible penalties for non-compliance.
How does workers’ compensation insurance in Colorado work?
As an employer in the state of Colorado, you must secure workers’ compensation coverage as soon as you have one or more part-time or full-time employees. Businesses in Colorado can obtain coverage by purchasing a policy through a licensed commercial carrier. Carriers can be found through an online directory such as Sircon.1
Some companies can qualify to become self-insurers. In order to do so, the company must be in business for at least 5 years or be the subsidiary of a company that has been in business for at least 5 years. In addition, the company must have at least 300 full-time employees working in Colorado or have (or have a parent company with) at least $100 million in assets.
Who needs workers’ compensation insurance in Colorado?
All employees, including part-time workers, must be covered by your workers’ comp policy in the state of Colorado unless they are on the list of exemptions. There are also some special rules for independent contractors, sole proprietors, LLC members and corporate officers to take into consideration.
If you hire independent contractors, you’re not required to purchase workers’ compensation coverage for them. However, in the state of Colorado, all workers are “considered employees unless proven otherwise.” Workers can be “proven” to be an independent contractor if they are both free from direction and control while performing their work and they own and operate an independent business that does that kind of work.
If you are self-employed or a sole proprietor, you aren’t required to purchase workers’ compensation insurance for yourself unless you’re in the construction industry (in which case you must either purchase insurance or reject coverage). Even if you’re not legally compelled to insure yourself, it could still be a good idea from a risk management perspective. Sustaining a serious injury while performing your work can cost you thousands of dollars in hospital bills and lost wages. Such a setback could be exponentially more expensive than paying monthly insurance premiums.
LLC members and corporate officers
If your business is a corporation or an LLC, you and your partners or corporate officers are considered employees by the state of Colorado. That means you must either provide coverage for them and yourself or reject coverage. An individual can reject coverage if they own at least 10% of the company and is a president, vice-president, secretary, treasurer, chairman of the board or an LLC member.
As with most states, in Colorado there are certain exemptions to who must be covered by workers’ comp insurance. Those exemptions are:
- Domestic workers who work less than 40 hours per week and less than 5 days per week
- Real estate brokers or agents who work entirely on commission
- Certain motor carriers who lease to or from drivers
- Casual farm or ranch laborers
- Ski volunteers
For more detail and information about employee exemptions, read this Employer’s Guide from the Colorado Department of Labor and Employment.
What are the penalties for not having workers’ comp in Colorado?
Businesses that fail to properly insure their employees are subject to steep fines and penalties from the state of Colorado. Businesses with uninsured workers can be fined up to $500 per day. If an employee is hurt on the job, it’s up to the business owner to provide all medical care costs and lost wages, as well as an additional 25% penalty. Non-compliant businesses can also be shut down.
What does workers’ comp cover?
If one of your employees is injured or becomes ill on the job, workers’ comp can cover their immediate medical expenses such as ambulance rides, emergency room visits, x-rays, surgery and prescription medications.
For example, if a kitchen employee reaches into a sink and slices their hand on a broken glass, they might require medical attention. Workers’ comp could cover the costs of their emergency room visit, stitches and pain management prescriptions.
Many work-related incidents can leave employees unable to work for several weeks or months. Workers’ comp can provide some relief for employees in the form of partial wage replacement.
If an employee breaks their foot in a work-related accident, they could end up stuck at home for multiple months. While they’re out of work, workers’ comp would cover some of their lost wages.
Some work-related injuries require long-term care such as physical therapy or pain management. Often, these injuries are more the result of repetitive workplace stress rather than a single traumatic incident. Chronic back issues for construction workers and carpal tunnel syndrome for office employees are two common examples of the types of workers who must receive ongoing care due to repetitive stress. If their claim is approved, workers’ comp can cover the costs associated with their ongoing care.
If the unthinkable happens and an employee passes away because of a workplace incident, workers’ comp can cover funeral costs and other death benefits for the deceased worker’s family or beneficiaries.