New Jersey

Buying workers’ compensation for:

New Jersey

State Fund: No

Insurance Coverage Requirements: Workers’ Compensation is technically considered elective but is practically compulsory in New Jersey. New Jersey has a single law, which includes two alternatives for employers: 1) purchase a standard workers’ compensation insurance policy; or 2) get approval to self-insure from the state and purchase a form of employers’ liability insurance based on traditional common law remedies. Due to the restrictive nature of the statute, virtually all New Jersey employers have opted to purchase a workers’ compensation insurance policy. Waivers are not permitted.

Who is Required to Purchase Workers’ Compensation Coverage?

All employers operating in NJ, with the exception of public employers and employers of domestic workers, must provide workers’ compensation insurance for the payment of obligations to injured employees or to dependents of deceased employees. Even out-of-state employers may need workers’ compensation coverage if a contract of employment is entered into in New Jersey or if work is performed in New Jersey.

Corporations - All corporations operating in NJ must obtain WC insurance or be approved for self-insurance as long as any one or more individuals, including corporate officers, receives compensation for services to the corporation. There is no minimum payroll or single-officer exemption.

Partnerships/LLC’s - All partnerships and Limited Liability Companies (LLC’s) operating in NJ must obtain WC insurance or be approved for self-insurance as long as any one or more individuals, excluding partners or members of the LLC, receives compensation for service. There are no exclusions for family members or minimum payroll.

Sole Proprietorship - All sole proprietorships operating in NJ must obtain WC insurance or be approved for self-insurance as long as any one or more individuals, excluding the business owner, receives compensation for service. There are no exclusions for family members or minimum payroll.

Factors that Impact Coverage

  • You are a sole proprietor, partner, corporate officer or member of an LLC: You must be covered by a workers’ compensation policy if you have one or more employees. Employers wishing to opt out of coverage must obtain Comprehensive Employers’ Liability Insurance, which no insurer in the state currently offers.

Failure to Secure Compensation

Failure to provide the required workers’ compensation insurance coverage is a disorderly persons offense and, if such failure is determined to be willful, a crime of the fourth degree. Penalties for failure to provide such coverage are up to $1,000 for the first twenty days and up to $1,000 for each ten days thereafter.

In addition, in cases where a workers’ compensation award in the Division of Workers’ Compensation against the defendant is not paid at the time of the sentence, the court may suspend sentence upon that defendant and place him on probation for any period with an order to pay the delinquent compensation award to the claimant through the probation office of the county. Where the employer is a corporation, the president, secretary, and the treasurer who are actively engaged in the corporate business will be liable for failure to secure the protection. Any contractor placing work with a subcontractor will, in the event of the subcontractor’s failing to carry workers’ compensation insurance, become liable for any compensation which may be due an employee or the dependents of a deceased employee of a subcontractor. The contractor will then have a right of action against the subcontractor for reimbursement.

The Office of Special Compensation Funds, on a regular basis, conducts a cross-match of their database with the Department of Banking & Insurance’s Compensation Rating & Inspection Bureau (NJ CRIB), to identify uninsured employers. Once an employer is identified through this cross match, a letter and a cross-match response form is issued.

If you are an employer that has received this form, you should provide the requested information as soon as possible to ensure that penalties are not improperly assessed against you.

Proof of Coverage is Required

New Jersey law requires every employer to post and maintain, in a conspicuous place or places in and about the worksite, a form prescribed by the Commissioner of the Department of Banking and Insurance, stating that the employer has secured workers’ compensation insurance coverage or has qualified with the Department of Banking and Insurance as a self-insured employer.

For insured employers, the notice must include the name of the insurance carrier and other items as required by the Department of Banking and Insurance.

The form of notice is prescribed by the Commissioner of Insurance and shall be clearly printed on a minimum of 90# index, 8½" by 11" in size.

Independent Contractors

Mistakenly classifying an employee as an independent contractor can result in significant fines and penalties.

View 20 factors used by the IRS and our independent contractor questionnaire to determine whether you have enough control over a worker to be an employer.

Other Tips

If your insured employs workers in multiple states or your insured’s employees are temporarily working out-of-state, they need to purchase insurance for all the states where their workers are located, according to each state’s laws. Call 1-800-476-2948 and let us walk you through it.

The nature of your insured’s business, number of employees being covered and past coverage and claims are all factors in how much their premium will cost.