Short answer: Yes, once you have three or more employees. Construction businesses doing work that needs a Construction Industries Division license must carry it regardless of headcount. Part-time and seasonal workers, paid family members and 10% owners all count toward three. Since a 2016 state Supreme Court ruling, farms and ranches follow the same three-employee rule.
The two triggers
The New Mexico Workers' Compensation Administration (WCA) FAQ states the rule plainly:
| Business type | Coverage required at |
|---|---|
| Most employers | 3 or more workers |
| Activities requiring a Construction Industries Licensing Act license | Any number of employees |
| Agricultural employers | 3 or more workers (since June 30, 2016) |
| Out-of-state employer with 3+ total employees and one worker in New Mexico | Needs a New Mexico policy |
Who counts toward three
The WCA says all of these count:
- Part-time and seasonal workers.
- Family members who are paid wages.
- "Executive employees" of a corporation, LLC or professional association. Under §52-1-7 that means the chairman, president, vice president, secretary, treasurer or other executive officer who owns 10% or more of the stock, or a 10% interest in the LLC.
- Partners in a limited partnership.
- The owner of a construction business, although a CID-licensed sole proprietor may exempt themselves.
An owner or executive employee may choose to be excluded from the policy, but the WCA is explicit that they are still counted when deciding whether the business has three workers. So an LLC with two 50% members and one part-time bookkeeper has three, and needs a policy, even if both members opt out of their own coverage.
Farms and ranches after 2016
On June 30, 2016, the New Mexico Supreme Court held that the farm-labor exclusion in §52-1-6(A) was unconstitutional. Agricultural employers with three or more employees now need coverage. The WCA notes the court's discussion of family chores and the "culture of neighboring": unpaid family members and neighbors helping out are treated as volunteers. Pay them wages, and they count.
Independent contractors
You aren't responsible for covering a 1099 contractor's employees, but the WCA advises verifying that contractors carry their own required coverage before you hire them. A contract or a 1099 form doesn't settle classification. The test is who has the right to control the work and its details, means and methods, judged case by case.
Ongoing employer duties
- Poster and forms. Display the WCA poster with Notice of Accident forms in a conspicuous place. Both are free from the WCA.
- Report accidents within 72 hours of notice to your insurer or self-insurance program, even if you doubt the claim is compensable.
- Choose the doctor or let the worker choose. Either side may switch after 60 days of treatment using the Notice of Change of Healthcare Provider form.
- Quarterly assessment fee: $4.80 per covered employee on the last working day of each quarter, of which $2.25 is paid by the worker and $2.55 by the employer, filed with the Taxation and Revenue Department on form WC-1.
- Rehire duties. After maximum medical improvement, you must offer to rehire under conditions the WCA lists, such as when you're hiring and the doctor certifies the worker fit.
Employers paying $15,000 or more in annual premium, and self-insureds, must also complete a safety inspection and file an affidavit, or face a penalty of up to $5,000.
If you're required and uninsured
Any noncompliant employer is referred for enforcement. The WCA's answer for agricultural employers describes what can follow:
- Exposure in district court to compensatory and punitive damages, fees and costs.
- A temporary restraining order stopping operations until a policy is in place.
- Penalties of up to $1,000 per day of violation.
- Uninsured Employers' Fund reimbursement. If the fund pays an injured worker, the business must repay all benefits plus a penalty of 15% to 50%, interest and fees.
A compliance officer will give the business time to obtain a policy first. Note that the WCA doesn't set class codes or premiums; insurers do.
Bottom line
In New Mexico, count everyone, including part-timers, paid relatives and 10% owners, and remember construction needs coverage from the first hire. See our workers' compensation insurance page.
Get a quote from Alishahi Insurance or call (877) 711-4545. More about insurance in New Mexico.
Frequently asked questions
How many employees before workers' comp is required in New Mexico?
Three. Businesses doing work that needs a Construction Industries Division license need coverage regardless of headcount.
Do part-time workers count toward New Mexico's three-employee rule?
Yes. Part-time, seasonal and paid family workers all count.
Do owners count toward the three employees in New Mexico?
Executive employees owning 10% or more count, even if they exclude themselves from coverage.
Do New Mexico farms need workers' comp?
Yes, with three or more employees, after the state Supreme Court struck down the farm-labor exclusion in 2016.
What happens if a New Mexico employer has no workers' comp?
Enforcement, possible court damages, a restraining order, penalties up to $1,000 a day, and repayment of any Uninsured Employers' Fund benefits plus 15% to 50%.
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.