Coworkers can sometimes feel like family, but what happens when they actually are?
Small business owners often ask us whether they need workers’ compensation insurance if all of their employees are family members.
The rules on which family members can be excluded from workers’ compensation coverage, if any, differ based on state laws. Here are the rules in SFM’s core states:
Indiana
Family members must be covered, although there are some exceptions for farm operations. See our Indiana guide for more details.
Iowa
On family farms, spouses, parents, brothers, sisters, children and step-children are exempt from coverage. See our Iowa guide for more details.
Kansas
Family members must be covered, although there are some exceptions for farm operations. See our Kansas guide for more details.
Minnesota
Spouses, parents, children and certain other relatives of executive officers of closely held corporations and managers of limited liability corporations can be excluded under certain conditions. See our Minnesota guide for more details.
Nebraska
Farms are exempt from providing workers’ compensation coverage if they employ only related employees, spouses or relatives within the third degree of kinship by blood or marriage. See our Nebraska guide for more details.
South Dakota
There are no special exclusions for family members. See our South Dakota guide for more details.
Tennessee
In general, employers with five or more employees must provide workers’ compensation insurance coverage and family members are included when determining the number of employees. There may be exemption if the applicant and members of the same family hold at least 95% ownership of the business. See our Tennessee guide for more details.
Wisconsin
Family members must be covered, although there are some exceptions for farm operations. See our Wisconsin guide for more details.
Learn more about workers’ compensation coverage
Determining whether your employees fit into these categories can be complicated. It’s best to contact your agent, insurer, employment law attorney, or state’s labor department to find out whether you’re required to provide workers’ compensation insurance.
To hear more about this subject, watch our Q&A video below:
This is not intended to serve as legal advice. Always consult with your own legal counsel to evaluate legal requirements specific to your business.