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Navigating New Jersey workers’ compensation insurance rules can be a lot to handle but almost all NJ employers are required by law to have coverage or be approved for self-insurance. This requirement includes part-time and seasonal workers. Without having the proper coverage, employers can face extensive fines, including a lien against the business. That said, it can take time to navigate all the different rules on how to set up a policy and what the expectations are.
To help you better understand New Jersey workers’ compensation requirements, we’ve put together this comprehensive guide that is designed to answer many of your questions, point you to the right resources, and help you keep your business compliant.
Why is it important to have workers’ compensation insurance?
Workers’ compensation insurance provides benefits for employers and employees alike. Workers’ comp provides employees with a level of reassurance that any illness or injury incurred on the job will be handled promptly, without any out-of-pocket expenses. But workers’ comp coverage also protects employers from costly lawsuits brought by injured employees as well as steep financial penalties, liens, and even criminal charges.
New Jersey workers’ compensation insurance: Which employers must have it?
In New Jersey, the following employers must have valid workers’ compensation insurance in effect at all times:
- Corporations – Any corporation that is operating in New Jersey is required to maintain workers’ compensation insurance or be approved for self-insurance. This requirement includes all corporate officers.
- Partnerships/LLCs – Any partnership that has an individual or individuals performing services for the partnership or LLC must maintain active coverage. As noted below, partners and members of an LLC are exempted from this requirement.
- Sole proprietors with employees – Sole proprietors with employees are required to have workers’ compensation in place.
Are there any exemptions?
Though the majority of employers in New Jersey must have workers’ compensation insurance, there are some exemptions, including:
- Unpaid interns
- Unpaid volunteers
- Independent contractors
- Sole proprietors with no employees
Partners in a partnership and members of an LLC are also excluded from the requirement.
What does workers’ compensation cover in New Jersey?
Though this is something that both employers and employees hope never happens, New Jersey workers’ compensation insurance covers the following areas in the event of a claim.
Medical benefits
Medical benefits include all necessary and reasonable medical treatment, prescriptions, and hospital services related to a work injury or illness.
Temporary total benefits
This benefit is available to workers that are disabled for more than seven days. Temporary total benefits are retroactive to the first day of injury and are paid until the worker can return to work or reaches the 400 week maximum for benefits. This benefit is paid at a rate of 70% of the worker’s average weekly wages.
Permanent partial benefits
When an illness or injury results in permanent bodily impairment, benefits are paid to the worker based on functional loss. These payments are made on a weekly basis and must begin once temporary disability ends.
Permanent total benefits
This benefit pays workers that are unable to return to any type of gainful employment, and will continue for up to 450 weeks, with an extension provided to the worker if they can demonstrate that they remain completely disabled. Similar to temporary total benefits, these payments are made at a rate of 70 percent of the worker’s average weekly wages.
Death benefits
If a worker dies as a result of a work-related illness or injury, dependents may be eligible to receive death benefits, including funeral expenses up to $3,500.
How can a New Jersey employer purchase workers’ comp insurance?
A New Jersey employer can obtain workers’ compensation coverage in one of two ways:
- By purchasing a workers’ compensation policy from one of more than 400 licensed insurance companies in New Jersey that are authorized to sell workers’ compensation insurance. Company premiums are based on the work performed along with the claims history of the employer and their current payroll liability.
- Through self-insurance, which requires the approval of the Commissioner of the Department of Banking and Insurance. Approval is based on the financial ability of the employer to meet specific obligations. Depending on financial circumstances, employers may need to post a security deposit to ensure financial ability.
What are the penalties for not having insurance?
New Jersey penalizes employers for not carrying insurance, but it also penalizes employers for misclassifying employees. For example, if an employer states that an employee is really an independent contractor to avoid paying workers’ compensation premiums for them, they can be charged with a fourth-degree felony for reporting false, incomplete, or misleading information.
Employers who fail to maintain adequate workers’ compensation insurance for a period of ten consecutive days will be fined $5,000, with an additional $5,000 fine each ten-day period that the employer fails to have insurance coverage.
If failure to insure is proven, New Jersey law provides for civil penalties against an employer and its officers, with awards and penalties assessed, often in the form of liens.
How are workplace injuries reported?
Employees are required to report an accident or injury as soon as possible. Notice must be made to a supervisor, personnel office, or any person in a position of authority. Notice does not have to be in writing.
Once an incident has been reported, the employer must file a ‘First Report of Injury’ electronically with the state, where the claim will be reviewed. Once a determination has been made, the injured worker and the employer will be notified, and the worker directed to an authorized medical provider.
How are treating physicians chosen?
Under New Jersey workers’ compensation law, the employer and/or the insurance carrier will select the medical provider(s) to treat any employee injury or illness, with the exception of an emergency.
More resources for New Jersey employers
For more information about workers’ compensation requirements in New Jersey, contact the New Jersey Department of Labor and Workforce Development – Department of Workers’ Compensation, at 609-292-2515. Below are some additional resources that may be useful for New Jersey employers.
New Jersey workers’ compensation insurance is necessary for almost all NJ employers
Having a workers’ compensation policy can be a wise business decision. On one hand, workers’ comp provides peace of mind for your employees, since they know they’ll be taken care of should they be injured on the job. But workers’ compensation insurance is just as important for protecting employers from expensive penalties along with potential liability from employee illness or injury.
If you have any questions or need assistance with setting up a workers compensation policy for your business, we can help.
Please note all material in this article is for educational purposes only and does not constitute tax, benefits or legal advice. You should always contact a qualified tax, legal or financial professional, in your area for comprehensive tax or legal advice.
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Jon Davis is the Sr. Content Marketing Manager at OnPay. He has over 15 years of experience writing for small and growing businesses. Jon lives and works in Atlanta.