Is Workers’ Comp Required in PA? Exemptions and Penalties

Workers’ compensation is required in PA for virtually every employer, with the obligation starting on the first day an employee begins work.¹ There is no small-business exemption, no minimum number of employees, and no probationary window before coverage kicks in. In return for providing this no-fault coverage of medical bills and lost wages, employers get broad protection from personal injury lawsuits by workers hurt on the job.² Going without coverage is a criminal offense, and the penalties compound for every day you’re uninsured.

Which Employers Have to Carry It

If your business has at least one person who could be injured or develop a work-related illness while working in Pennsylvania, you need a policy.¹ Full-time, part-time, and seasonal workers all trigger the requirement equally. Family members on the payroll count. Non-profits are not exempt; if a non-profit has employees, it must carry coverage like any for-profit business.

The mandate can reach beyond state lines. If a job is primarily based in Pennsylvania, or a worker was hired here and works in a state that has no applicable workers’ compensation law of its own, Pennsylvania coverage still applies.¹ Remote employees working from other states can create additional obligations under those states’ own laws.

Employee or Independent Contractor

The Workers’ Compensation Act uses a broad definition of “employee” that covers salaried staff, hourly workers, and anyone else whose work the employer has the right to direct and control. Coverage starts on day one, not after a set number of hours or a probationary period.

The line that matters is between employees and independent contractors, and Pennsylvania sets a two-part test that both prongs must satisfy: the worker is free from the employer’s control over how the work gets done, and the worker is engaged in an independently established business of their own.³ A person who has no other clients, uses your equipment, and works on your schedule is almost certainly an employee, whatever the contract calls them.

Stricter Rules in Construction

The Construction Workplace Misclassification Act (Act 72) layers additional requirements on top of the general test. A construction worker qualifies as an independent contractor only with a written contract, ownership of the essential tools and equipment, a proprietary interest in the business, a separate business location, at least $50,000 in liability insurance, and either a history of similar work for others or a demonstrated availability to do so.³ Misclassification disputes surface here more than anywhere else, and getting it wrong can mean back benefits, penalties, and criminal exposure.

The Actual Exemptions

A handful of categories fall outside the requirement. An employer can skip coverage only if every worker on the payroll fits into one of these.⁴

Owners Without Employees

Sole proprietors and general partners with no employees do not have to cover themselves. Hire one worker, and coverage becomes mandatory for that worker. Corporate officers are treated differently and can opt out by filing an Application for Executive Officer Exception (Form LIBC-509), with the rules turning on the corporate form.⁵

For-profit S-corporations: officers with an ownership interest as defined by the Tax Reform Code may request exclusion.
For-profit C-corporations: officers must hold at least a 5% interest in the corporation.
Non-profit corporations: only officers serving voluntarily and without pay can be excluded.⁴

The exclusion form goes to your insurance carrier if you have a policy covering other employees, or to the Bureau of Workers’ Compensation’s Compliance Section if there are no other employees.⁶

Agricultural and Domestic Workers

Agricultural workers are exempt if they earn less than $1,200 from a single employer in a calendar year and work fewer than 30 days. Cross either threshold and coverage is required. Domestic workers in a private home are generally exempt, though an employer may voluntarily buy coverage for them.

Workers Under Federal Programs

Some workers fall under federal workers’ compensation systems rather than Pennsylvania’s, including most federal government employees, railroad workers covered by the Federal Employers’ Liability Act, and maritime workers covered by the Longshore and Harbor Workers’ Compensation Act. Separate Pennsylvania coverage is not required for those workers.

Religious Exemptions

Members of recognized religious sects with conscientious objections to insurance may apply by filing Form LIBC-14A (Application for Religious Exception) along with a supporting affidavit from each exempt worker.⁷ An approved IRS Form 4029, which exempts individuals from Social Security and Medicare taxes on religious grounds, can also serve as qualifying documentation.

What Happens if You Don’t Carry It

Pennsylvania treats operating without required workers’ compensation coverage as a criminal matter. Under Section 305 of the Workers’ Compensation Act, an employer who fails to insure is guilty of a third-degree misdemeanor for each day of non-compliance.⁸ A third-degree misdemeanor carries up to one year in jail and a fine of up to $2,500. Because every uninsured day is a separate offense, even a short stretch without coverage can pile up.

If a court finds the failure to insure was intentional, the charge becomes a third-degree felony, punishable by up to seven years in prison and fines of up to $15,000 per offense.⁸ A judge can also order restitution to a worker who received a compensation award. Separately, the state can issue stop-work orders that shut down operations until coverage is in place.⁹

Then there’s the financial backstop. If a worker is hurt and the employer has no coverage, the Uninsured Employers Guaranty Fund can pay benefits directly to the injured worker.¹⁰ The employer then owes the Fund every dollar it paid out. Uninsured employers also lose the lawsuit protection that compliant employers enjoy, so the injured worker can sue them directly in civil court.

How to Get Coverage

There are three legal paths to comply. Most businesses use the first.

Private Insurance

Buy a policy from a private carrier licensed in Pennsylvania, working through an agent or broker to compare rates. Premiums depend on your industry classification, payroll, and claims history.

State Workers’ Insurance Fund

The State Workers’ Insurance Fund (SWIF) exists so that every Pennsylvania employer can get coverage, even when private carriers decline. It’s often the answer for new businesses without a track record, employers in high-risk industries, and companies whose loss history makes private coverage expensive or unavailable.¹¹

Self-Insurance

Large, financially strong employers can apply to self-insure, paying claims directly rather than through a carrier. It’s not realistic for most businesses. Applicants must have been in business for at least three consecutive years, be incorporated under U.S. law, maintain an adequate injury prevention program, and demonstrate the financial capacity to cover claims, including posting a surety bond or other security.¹² The Bureau of Workers’ Compensation reviews each application and charges a $500 fee for the self-insurance permit.¹³

1
Pennsylvania Department of Labor & Industry. PA Workers’ Compensation Employer Information
2
Pennsylvania General Assembly. Pennsylvania Workers Compensation Act – Chapter 3
3
Department of Labor and Industry. Employee or Independent Contractor
4
Department of Labor and Industry. Workers Compensation Compliance
5
Department of Labor and Industry. Forms 509 and 513
6
Pennsylvania Department of Labor & Industry. Application for Executive Officer Exception
7
Pennsylvania Department of Labor & Industry. Section 304.2 Application for Religious Exception
8
Pennsylvania General Assembly. Pennsylvania Statutes Title 77 PS Workers Compensation 501
9
Department of Labor and Industry. Worker Protection and Labor Law Non-Compliance List
10
Pennsylvania Code. 34 Pa Code Subchapter I – Uninsured Employer Guaranty Fund
11
Commonwealth of Pennsylvania. Apply for State Workers Insurance Fund (SWIF) Coverage
12
Pennsylvania Code. 34 Pa Code Subchapter A – Individual Self-Insurance
13
Pennsylvania Department of Labor & Industry. Pennsylvania Workers Compensation Act