Remote Work and Workers' Compensation: A Costly Oversight HR Leaders Can't Afford

As remote work becomes the norm, particularly in professional services and technology sectors, HR leaders face new challenges in managing workers’ compensation coverage.

A common and potentially costly error is failing to update workers’ compensation policies when onboarding remote employees in states where the company did not previously have a presence.

The Legal Landscape: Location Matters

Workers’ compensation is governed by the state's labor laws where the employee physically works, not where the company is headquartered. When a remote employee is hired in a new state, employers must promptly notify their insurance broker or consultant to endorse the policy for that state. Overlooking this step can expose organizations to significant legal and financial risks.

The Risks of Non-Compliance

States like New York impose strict daily fines for non-compliance and require additional policies, such as group disability coverage. New Jersey and Hawaii also levy steep penalties for failing to secure proper coverage. Inadvertently missing these requirements can result in substantial fines, backdated premiums, and even litigation.

Monopolistic States: A Unique Challenge

For the four monopolistic states, Ohio, North Dakota, Washington, and Wyoming, workers’ compensation coverage must be secured directly from the state, not through private insurers. Each state has its own procedures and deadlines, making it critical to understand and comply with its unique requirements.

Actionable Steps for HR Leaders

• Establish a Centralized Notification Process: Create a standardized procedure requiring HR or hiring managers to notify your insurance broker or consultant whenever an employee is hired in a new state.
• Maintain a State Coverage Checklist: Regularly update a checklist of all states where employees are located and cross-reference it with your current workers’ compensation policy endorsements.
• Train HR and Payroll Teams: Ensure all relevant staff understand the importance of state-specific compliance and the steps required for timely policy updates.
• Monitor Regulatory Changes: Assign responsibility for tracking changes in state workers’ compensation laws, especially in states with strict penalties or unique requirements.
• Address Monopolistic States Separately: Develop a separate workflow for securing coverage directly from monopolistic states, including reminders for renewal and compliance deadlines.

As remote work becomes more common, ensuring compliance with workers' compensation regulations is increasingly complex. HR leaders should establish strong procedures and maintain open communication with their insurance partners to safeguard their organizations from expensive mistakes and guarantee comprehensive coverage for all employees, regardless of their work location.

Protecting your workforce starts with the right strategy. OneDigital’s Property and Casualty specialists can help guide you toward better protection and peace of mind. Learn More.