Compliance guideRead at source, 23 September 2026
Workers’ Comp Requirements by State: Employee Thresholds, the Texas Exception and the Four State-Fund States
Workers’ compensation is required by state law, not federal law, so the rule depends on where your employees work. In most states coverage is expected from the first employee, but a group of states set a head-count threshold: Alabama, Mississippi, Missouri and Tennessee at five employees, Florida and South Carolina at four, and Arkansas, Georgia, New Mexico, North Carolina and Virginia at three (Virginia’s rule is “more than two”). Several of those drop the threshold to one employee for construction. Texas is the exception: most private employers may choose not to carry coverage at all. And in North Dakota, Ohio, Washington and Wyoming, coverage must come from the state fund rather than a private insurer.
States with an employee-count threshold
These are the states where we verified at source that a private employer below a set number of employees is generally not required to carry coverage. Each has exceptions, and most count part-time employees and sometimes owners.
| State | Coverage required at | Construction and other exceptions |
|---|---|---|
| Alabama | 5 or more employees (generally not required below five) | — |
| Arkansas | 3 or more employees | Exceptions apply |
| Florida | 4 or more employees, including corporate officers and LLC members | Construction: 1 or more. Agriculture: 6 regular or 12 seasonal workers |
| Georgia | 3 or more employees regularly employed | — |
| Mississippi | 5 or more employees regularly employed | — |
| Missouri | 5 or more employees | Construction: 1 or more |
| New Mexico | 3 or more workers | Construction Industries Licensing Act employers: regardless of number |
| North Carolina | 3 or more employees regularly employed | Radiation exposure: 1 or more |
| South Carolina | 4 or more employees, and annual payroll of $3,000 or more | Certain agricultural employees exempt |
| Tennessee | 5 or more employees | Construction: 1 or more |
| Virginia | More than 2 employees, part-time or full-time regularly employed | “No waivers and no exceptions” once over the threshold |
The practical trap is growth. A roofing contractor in Missouri needs coverage from the first employee; a landscaping company in Georgia needs it from the third regular employee, and the third hire of the spring is the one that triggers it. Buy the policy before that person’s first shift, not after the first injury. Our page on roofing company hiring covers the trade side of this.
Texas: the state where coverage is optional
The Texas Department of Insurance puts it plainly: “In Texas, private employers can choose to carry workers’ compensation insurance coverage, but it is not required in most cases.” Employers who opt out are called non-subscribers, and opting out comes with obligations:
- File DWC Form-005 each year between February 1 and April 30, within 30 days of hiring the first employee, and within 10 days of ending coverage.
- Notify employees: post the non-coverage notice in English, Spanish and any other appropriate language, and give new employees written notice.
- Report injuries: non-subscribers with five or more employees must report injuries causing more than one day of lost time on DWC Form-007.
Non-subscribers also lose the protection coverage provides: an injured employee can sue the employer in court, and certain common-law defenses are unavailable to a non-subscriber. Government contracts and some commercial contracts require coverage regardless.
The four monopolistic state-fund states
In North Dakota, Ohio, Washington and Wyoming, employers cannot buy workers’ comp from a private insurer. North Dakota’s WSI is “the sole provider and administrator of workers’ compensation”; Washington’s L&I says coverage must come from L&I or through certification as a self-insured employer; Ohio employers are “either state-fund or self-insured.” Wyoming and North Dakota do not allow self-insurance for employers required to have coverage, and in Wyoming coverage is mandatory for industries the state classes as extra-hazardous and optional for others.
A multi-state employer with staff in these states needs a separate state-fund account there, because a private policy’s other-states coverage generally does not extend to monopolistic states.
Everywhere else: assume coverage from the first employee, then confirm
Outside the states above, most states expect coverage once you have an employee, with exemptions that vary: sole proprietors and partners, some corporate officers, domestic workers, farm labor, casual labor and real estate agents are the common ones. Check the state workers’ compensation agency for the state where each employee works — not where the company is headquartered.
Three questions that decide most cases
Who counts as an employee?
Part-time employees usually count toward the threshold. Misclassifying workers as independent contractors does not take them out of the count if the state would treat them as employees, and it is one of the most common ways small employers end up uninsured.
Is the work construction?
Several threshold states require coverage from the first employee in construction, and some require subcontractors to carry it or be covered by the general contractor.
Where does the employee work?
Coverage follows the state of employment. A crew that works across a state line may need coverage under both states’ rules.
Frequently asked questions
Is workers comp required in every state?
Every state has a workers’ compensation law, but not every employer must carry it. Texas lets most private employers opt out, and several states exempt employers below a head count, such as fewer than three, four or five employees. Check the rule for each state where you have employees.
How many employees do you need before workers comp is required?
It depends on the state. Among states we verified: 3 or more in Arkansas, Georgia, New Mexico and North Carolina, more than 2 in Virginia, 4 or more in Florida and South Carolina, and 5 or more in Alabama, Mississippi, Missouri and Tennessee. Many other states require coverage from the first employee.
Do construction companies need workers comp for one employee?
In several threshold states, yes. Florida, Missouri and Tennessee require coverage for construction employers with one or more employees, and New Mexico requires it for employers under the Construction Industries Licensing Act regardless of head count.
Is workers comp optional in Texas?
For most private employers, yes. The Texas Department of Insurance says private employers can choose to carry coverage but it is not required in most cases. Non-subscribers must file DWC Form-005 each year, notify employees, and report lost-time injuries if they have five or more employees.
What are monopolistic workers comp states?
North Dakota, Ohio, Washington and Wyoming, where employers must obtain workers’ compensation from the state fund rather than a private insurer. Ohio and Washington allow qualifying employers to self-insure; North Dakota and Wyoming do not.
Do part-time employees count for workers comp?
Usually yes. Virginia, for example, counts part-time or full-time employees regularly employed. Check the definition in each state, which may also count owners or corporate officers.
Does workers comp cover independent contractors?
Generally no, but calling someone a contractor does not make them one. If the state would treat the worker as an employee, they count toward the threshold and are covered, and an employer without coverage may be liable.
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