Workers’ Compensation Exemptions New York: Who’s Required to Have Coverage

Quick-reference table: who needs coverage

For-profit businesses: the general rule

If your business is a sole proprietorship, partnership, LLC, LLP, or corporation and you have anyone working for you — full-time, part-time, seasonal, day labor, leased, borrowed, or even unpaid — that person counts as an employee for workers’ comp purposes. It doesn’t matter how you pay them or what you call them on paper.

Where it gets specific:

• Sole proprietors and partners aren’t required to cover themselves if they have no employees, though many choose voluntary coverage — especially if a general contractor or client requires proof of coverage to sign a contract.
• LLCs and LLPs follow the same logic: members and partners aren’t considered employees, so a member-only LLC with no staff doesn’t need a policy. Add one employee, and that changes immediately.
• Corporations get the narrowest exemption in the whole system: if your corporation has exactly one or two officers, they own 100% of the stock between them, each holds at least one share and an office title, and there’s no one else working for the business — no employees, no day labor, no unpaid family members — you’re exempt. Add a third officer, a third shareholder, or any outside worker, and the exemption disappears.

Independent contractors: the test that trips up NY contractors

This is the section that generates the most disputes — and the most uninsured-claim exposure. Calling someone a 1099 contractor doesn’t make them one under New York law. The state applies different tests depending on your industry.

Construction industry

Under the Construction Industry Fair Play Act, anyone injured while working for a construction contractor is presumed to be that contractor’s employee unless the contractor can prove otherwise. An individual only qualifies as a true independent contractor if the business can show all three of the following: the worker controls how they do the job, the work falls outside the contractor’s usual business, and the worker runs an independently established trade of their own.

If the “contractor” is actually a business entity — a sole proprietorship, partnership, or corporation — it has to clear a much longer bar: twelve separate conditions, including things like carrying its own capital investment, holding its own licenses, advertising to the general public, and having the right to work for other clients. Fall short on any one of the twelve, and the entity isn’t considered separate from your business for workers’ comp purposes.

Trucking and commercial goods transportation

A similar framework — the Commercial Goods Transportation Industry Fair Play Act — applies to drivers moving goods in commercial vehicles. A driver is presumed to be an employee unless the hiring business issues them a 1099 and can prove all three of the same core criteria (control, work outside the usual business, independently established trade). Business entities face an eleven-factor test that closely mirrors the construction version.

Every other industry

Outside construction and transportation, New York looks at a broader set of factors: whether the worker has their own FEIN or files self-employment taxes, maintains a separate business establishment, works for other clients, carries their own liability and workers’ comp insurance, advertises independently, and supplies their own tools and equipment. No single factor is decisive — the Board looks at the whole relationship.

One thing that catches business owners off guard: you can require a subcontractor with its own employees to carry its own workers’ comp policy, but you cannot require an individual worker to buy their own policy as a condition of working for you. That’s why general contractors routinely collect certificates of insurance from every sub before allowing them on-site — if the sub can’t produce one, the sub’s workers can end up rated on the general contractor’s own policy at audit time.

Household employers and domestic workers

If you employ a nanny, home health aide, housekeeper, cook, or similar domestic worker, coverage depends almost entirely on hours:

• 40+ hours per week for one household — coverage is required. Hours worked include time spent living in, sleeping, running errands, and any time the employer requires the worker’s presence.
• Under 40 hours per week, no live-in arrangement — not required, as long as domestic workers are the only people working for the household.
• Casual yard work or occasional chores around an owner-occupied one-family home — not required, unless the work is regularly scheduled or a minor is operating power equipment like a lawnmower.

One note worth flagging to clients: a standard homeowner’s policy rider does not cover domestic workers for workers’ compensation. That has to be a separate policy.

Staffing, leasing, and PEO arrangements

If you lease employees through a Professional Employer Organization (PEO) or staffing firm, coverage is still required — the question is just who provides it. Either the client business buys its own policy covering the leased staff, or the PEO carries a policy in the client’s name. Either way, proof of coverage has to be filed under the client’s own legal name and FEIN. And if you employ anyone directly — outside the leasing arrangement — you likely need a separate policy for them, since the PEO’s coverage typically only extends to the leased employees.

Nonprofits

Nonprofits that compensate staff generally need coverage, with a short list of exceptions: clergy performing purely religious duties, supervised amateur athletes on a nonprofit basis, people in a teaching role at a 501(c)(3) religious, charitable, or educational organization, and non-manual staff at those same 501(c)(3) organizations. A nonprofit that doesn’t compensate anyone — including its executive officers — isn’t required to carry coverage at all. But “compensation” includes stipends, room and board, and any other perk with real monetary value, not just a paycheck.

Family members and spouses

Family members working for a for-profit business — paid or unpaid — count as employees, full stop. Spouses providing services to a for-profit business are treated the same way, subject to the same owner/officer exclusions described above. The one carve-out: on farms, a farmer’s spouse and minor children aren’t counted as employees, as long as there’s no formal employment contract between them.

Student interns

Paid or unpaid, student interns working for a for-profit business, nonprofit, or government agency generally need to be covered. New York’s Workers’ Compensation Law Judges have held that the experience and training an unpaid intern receives has real value — equivalent to wages — which is why unpaid status alone doesn’t create a Workers’ Compensation exemption. The one exception: interns doing non-manual or teaching work for a 501(c)(3) religious, charitable, or educational institution.

Out-of-state employers with NY workers

If your business is based outside New York but has people working here, you may still need a full New York policy. That’s the case if you register for NY unemployment insurance, have a permanent NY location, work under a NY-issued permit or license, do construction work in the state, or had employees physically present in New York for 40+ hours a week over two straight weeks (or 25+ individual employee-days) in the prior year.

If your presence is more occasional — infrequent meetings or conferences, or just passing through without stopping for work — your home-state coverage can typically satisfy New York through “3C” coverage instead of a full policy, as long as your carrier has filed the proper consent form with the Board.

Other licensed professions with narrow workers’ compensation exemptions

A few specific roles carry conditional exemptions if a detailed written contract is in place: certain commission-based insurance agents, real estate agents structured as independent contractors under Article 12-A of the Real Property Law, and media sales representatives selling ad space or subscriptions. Each exemption depends on meeting a specific list of contract terms — missing one condition can void the Workers’ compensation exemptions entirely, so these are worth a closer look with your broker before you rely on them.

Frequently asked questions

Does a single-member LLC need workers’ comp in New York?

Not if the LLC has no employees. The member isn’t considered an employee of their own LLC. The moment you hire even one employee, coverage becomes mandatory.

Is workers’ comp required for a 2-person corporation in New York?

Only if both individuals own all the stock, each holds at least one share and a corporate office, and there are no other workers of any kind — no employees, day labor, or unpaid family. Add a third officer or shareholder, or any outside worker, and coverage becomes mandatory.

Can I require my subcontractors to carry their own workers’ comp policy?

Yes — if the subcontractor is an independent business with its own employees, you can require proof of its own coverage before letting it work on your job. You cannot, however, require an individual worker to buy a personal policy as a condition of working for you; that worker is legally your employee.

What happens if I don’t carry required workers’ comp coverage in New York?

The Workers’ Compensation Board can issue a stop-work order, along with financial penalties and potential criminal exposure for responsible parties. You’d also remain personally responsible for an injured worker’s medical costs and lost wages, since the obligation doesn’t disappear just because there was no policy in place.

Does a 1099 contractor remove my workers’ comp obligation?

Not automatically. New York applies its own multi-factor tests (stricter ones for construction and trucking), and a worker who’s directed, supervised, and dependent on your business for assignments can still be classified as your employee regardless of how they’re paid or taxed.

This page summarizes rules published by the New York State Workers’ Compensation Board and is provided for general informational purposes. It isn’t legal advice — if your situation is borderline, talk to a licensed broker or attorney before deciding you’re exempt.

Last updated 2026 · Reviewed by the Weinsurexyz team