Short answer: Yes. Minnesota has no minimum employee count, so an employer with a single part-time worker generally must carry workers' compensation or get approval to self-insure. A limited list of people is excluded by statute, including many owners and family members. Going uninsured can bring penalties of up to $1,000 per employee per week.
The rule: no threshold
The Minnesota Department of Labor and Industry (DLI) says Minn. Stat. §176.181, subd. 2 requires every employer to either buy workers' compensation insurance or obtain Department of Commerce approval to self-insure. DLI is direct about the count: there is no minimum number of employees, and one part-time employee generally triggers coverage.
DLI defines employees broadly as people performing services for hire, including minors, part-time workers and workers who aren't citizens.
Who the statute excludes
Minn. Stat. §176.041 lists people the law doesn't cover. Highlights:
- Sole proprietors and their spouse, parent and child.
- Business partners and their spouse, parent and child.
- Executive officers of closely held corporations that had fewer than 22,880 hours of payroll in the prior year, if the officer owns at least 25% of the stock, plus that officer's spouse, parent and child.
- Family-farm workers, and the spouse, parent and child of a farmer-employer.
- Household workers earning less than $1,000 in cash in a three-month period from one household.
- Independent contractors as defined in the law (but not their employees).
- Nonprofits paying no more than $1,000 in wages in a year.
Each exclusion has detailed wording, so check the statute or ask DLI before relying on one.
Owners can opt in
The same section lets excluded owners elect coverage. Business owners may cover themselves, partnerships may cover partners, and qualifying closely held corporations and LLCs may cover 25%-plus owners. Elections are made in writing to the insurer, take effect the day after the insurer receives notice, and must appear by name on a policy endorsement.
Penalties for going without
Minnesota enforces the requirement in three layers:
- Civil penalty. Under §176.181, subd. 3, the commissioner can order an uninsured employer to comply and pay up to $1,000 per employee per week of noncompliance.
- Criminal exposure. Willfully failing to insure is a gross misdemeanor.
- Special Compensation Fund. Under §176.183, injured employees of an uninsured employer still receive benefits from the fund. A compensation judge then orders the employer to repay the benefits and costs, plus a penalty of 65% of the compensation awarded. Owners or officers who direct the work can be named personally.
DLI's Special Compensation Fund unit investigates possible uninsured employers. Anyone can report a business anonymously through DLI.
How to get covered
DLI notes you can buy coverage through an insurance agent or directly from an insurer. Employers with the financial strength can apply to the Department of Commerce to self-insure, individually or as part of an approved group.
Construction contractors
DLI publishes a separate guide for construction contractors, warning that what you don't know about coverage can hurt you. It also addresses zero-exposure and wrap-up policies. Contractors who use subcontractors or crews should read it before bidding work.
Examples
A coffee shop owner hires one weekend barista. Coverage is required.
A sole proprietor graphic designer with no staff. No policy is required; the owner may elect coverage.
A small corporation with two 50% shareholder-officers and under 22,880 payroll hours. The officers can be excluded, but any employee they hire must be covered.
A household employs a nanny earning $1,200 a quarter. That's over the $1,000 household threshold, so the exclusion no longer applies.
What benefits look like
Workers' comp pays medical care and wage-loss benefits for work injuries and illnesses, and generally protects insured employers from lawsuits by injured workers. Read more in our workers' compensation insurance guide.
Questions to settle early
- Does any person on our payroll fall under a §176.041 exclusion, or does everyone count?
- Should our owners elect coverage for themselves?
- Are our "contractors" really independent under Minnesota's rules?
- If we're near the 22,880-hour payroll line, how does that change officer exclusions?
Bottom line
In Minnesota, the first employee usually means you need workers' comp. The exclusions are narrow, and the penalties for being uninsured stack quickly. Put coverage in place before that first paycheck.
Contact Alishahi Insurance or call (877) 711-4545. See insurance in Minnesota and our business owners policy (BOP) guide.
Frequently asked questions
How many employees do you need before workers' comp is required in Minnesota?
One. Minnesota has no minimum, and DLI says one part-time employee generally triggers coverage.
Are sole proprietors required to have workers' comp in Minnesota?
No. Sole proprietors are excluded, but they can elect coverage for themselves.
What is the penalty for no workers' comp in Minnesota?
Up to $1,000 per employee per week of noncompliance, and willful failure is a gross misdemeanor.
What happens if an uninsured employer's worker gets hurt in Minnesota?
The Special Compensation Fund pays benefits, and the employer must repay them plus a 65% penalty.
Are household workers covered in Minnesota?
Not if they earn less than $1,000 in cash in a three-month period from one household.
Alishahi Insurance · 439 N Canon Dr, Penthouse, Beverly Hills, CA 90210 · (877) 711-4545 · CA License #4348151. General information only. This isn't legal, tax or financial advice or a coverage determination. Coverage depends on policy language and underwriting, and rules vary by state.