Many small business owners employ family members. Whether it is a spouse, a child, a sibling, or a parent, the workers comp rules around family members vary by state and business structure. Getting this wrong can leave a family member unprotected or result in unexpected premium costs.
Spouses on Payroll
In most states, if a spouse works for the business and is on payroll, they are treated as an employee for workers comp purposes and must be covered. Some states allow spouses who are co-owners of a sole proprietorship to be excluded, but the rules vary. Check your state’s specific requirements with your agent.
Children Working in the Family Business
Children employed by a family business are generally subject to the same workers comp rules as any other employee. If they are on payroll, they typically need to be covered. Agricultural exemptions exist in some states for family farm workers, but most other industries have no family exemption.
Corporate Officers Who Are Family Members
Corporate officers, including family members who hold officer positions, often have the ability to exclude themselves from workers comp coverage by filing the appropriate form with the state. However, if a family member officer is actively working in the field, excluding them from coverage leaves them unprotected if they are injured.
The Bottom Line
When in doubt, cover family members. The cost of adding them to your policy is typically small, and the financial impact of an uninsured injury to a family member can be devastating personally and for the business.
Get Guidance from Comp Matters Inc.
Comp Matters Inc. helps East Coast business owners structure workers comp coverage correctly for their specific situation, including family member employees. Call (631) 248-2500 for a free consultation.
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