Maryland’s workers’ compensation exemptions cover a handful of well-defined groups: sole proprietors and partners, certain corporate officers and LLC members who file to opt out, small farm operations below statutory size thresholds, part-time domestic workers, licensed real estate agents who meet a four-part test, and workers who genuinely qualify as independent contractors. Everyone else who works for pay in Maryland is presumed to be a covered employee, and employers who guess wrong face criminal penalties.
Whether you qualify turns on your ownership stake, your role, your industry, or how many hours you work. The categories don’t overlap much, so the fastest way to find your answer is to read the one that fits your situation.
Sole Proprietors and Partners
Sole proprietors and partners are not considered covered employees under the Maryland workers’ compensation system and are not required to buy coverage for themselves. There is no form to file. The exemption exists because the system is built to protect employees from their employer, and a sole proprietor has no employer.
One boundary matters here. If you’re a sole proprietor with employees, you still must carry workers’ compensation insurance for those employees. Your personal exemption doesn’t extend to your workforce. Many sole proprietors and partners also choose to buy coverage voluntarily, because a single serious injury can shut down a small business.
Corporate Officers and LLC Members Who Opt Out
Any officer of a corporation or member of an LLC who provides services for compensation is automatically a covered employee under Maryland law. That’s the default. But five categories of owners can elect to opt out by filing an exclusion with the Workers’ Compensation Commission.1Maryland Workers’ Compensation Commission. Exclusion Request
- Officers of a close corporation, regardless of ownership percentage.
- Officers of a regular (non-close) corporation, with a cap of five officers per corporation who may opt out.
- Officers who own at least 20% of the stock in a farm corporation, meaning a corporation earning at least 75% of its income from farming.
- Officers who own at least 20% of a professional corporation and personally perform the professional service the corporation provides.
- LLC members who own at least 20% of the outstanding profit interests.
The election is not effective until the corporation or LLC sends written notice to both the Commission and the company’s workers’ compensation insurer, naming the individual electing out. A common mistake is filing the exclusion form with the Commission and forgetting the insurer. That leaves the election in limbo.
Opting out removes your own safety net. If you’re hurt while working for the business, you get no workers’ compensation benefits and would need to fall back on health insurance or a personal injury claim.
Small Farm Operations
Farm workers are covered employees only if the farmer has at least three full-time employees or an annual payroll of at least $15,000 for full-time employees.3Maryland General Assembly. Maryland Code Labor and Employment 9-210 – Farm Worker Below either threshold, coverage is optional.
The covered work includes operating equipment for crop or animal management, constructing or repairing machinery, and handling animals or crops. Office workers on a farm don’t fall under the agricultural rule; they’re treated under general workers’ compensation rules.4University of Maryland Extension. When Is Worker’s Compensation Coverage Required for Agricultural Workers
A small farm operator below the thresholds has no obligation to carry coverage, but without it an injured worker’s only legal remedy is a negligence lawsuit. Those are less predictable and often more expensive than a workers’ compensation claim, which is why many small-farm employers buy coverage voluntarily.
Domestic Workers
Domestic servants are generally exempt from mandatory coverage under §9-209 of Maryland’s Labor and Employment Article. The exception is the 16-hour rule: if a domestic worker is employed 16 or more hours per week by a single household, the employer must provide workers’ compensation coverage.5Maryland General Assembly. Maryland Code Labor and Employment 9-209 – Domestic Servant
This is the rule that catches homeowners with a nanny, housekeeper, or home health aide on a regular schedule. Below 16 hours per week there’s no obligation. At or above it, the homeowner is an employer for workers’ compensation purposes and faces the same penalties as any other uninsured employer for failing to secure coverage.
Real Estate Agents
Licensed real estate salespersons and associate brokers are specifically excluded from workers’ compensation coverage if four conditions are met: the agent is properly licensed, works under a written agreement with a licensed broker, earns compensation solely through commissions, and qualifies as an independent contractor for federal tax purposes.6Maryland General Assembly. Maryland Code Labor and Employment 9-222 – Real Estate Salesperson and Associate Real Estate Broker
The federal tax piece has its own two-part IRS test. Substantially all of the agent’s pay must be tied to sales output rather than hours worked, and the written agreement must state the agent will not be treated as an employee for tax purposes.7Internal Revenue Service. Statutory Nonemployees Most standard broker-agent agreements are already structured to meet all four conditions.
The exemption can fail when the working relationship doesn’t match the paperwork. A broker who sets mandatory office hours, assigns clients, or dictates how the agent performs the work can undermine the independent contractor classification. In that situation, an injured agent may argue they were functionally an employee entitled to benefits, and the written agreement won’t be the last word.
Independent Contractors
Any worker who is genuinely an independent contractor falls outside Maryland’s workers’ compensation system. The question is whether the classification holds up, and Maryland is aggressive about testing it in two industries.
For construction and landscaping, the state presumes an employer-employee relationship exists. The hiring party bears the burden of proving independent contractor status, often through the “ABC test”: the worker must be free from the company’s control and direction, must be engaged in an independent business of the same nature, and must perform work either outside the hiring company’s usual business or outside any of its worksites.8Maryland Department of Labor. Maryland Worker Classification
Outside those industries, classification comes down to traditional factors: who controls how the work is done, who supplies the tools, whether the worker can profit or lose money independently, and how permanent the relationship is. Whatever the contract says, auditors look at the reality on the ground.
If You’re Exempt and Get Hurt
Workers’ compensation is a trade. Covered employees receive guaranteed medical care and wage replacement without proving fault, and in exchange they give up the right to sue their employer for negligence. Exemption takes both sides of that trade off the table.
An exempt worker who is injured on the job has no workers’ compensation claim to file. What remains is the right to bring a personal injury lawsuit against whoever caused the injury, including the business that hired them. A negligence claim requires proving fault, but it also opens the door to damages that workers’ compensation doesn’t pay, including pain and suffering and full lost income without a statutory cap.
For business owners who opted out under §9-206, this practical reality means leaning on personal health insurance, disability insurance, or business savings if you’re hurt at work. None of those replace workers’ compensation cleanly, but they’re the alternative you’ve chosen when you file the exclusion.
Penalties for Getting It Wrong
Maryland treats failure to carry required workers’ compensation insurance as a criminal offense. An uninsured employer is guilty of a misdemeanor and faces a fine of up to $5,000, imprisonment of up to one year, or both. If the employer is a corporation, the officer responsible for general management in Maryland is personally on the hook for those same penalties.9New York Codes, Rules and Regulations. Maryland Code Labor and Employment 9-1108 – Failure to Secure Payment of Compensation
The exposure runs further. If an uninsured corporation or LLC can’t cover a workers’ compensation award, the officers or members responsible for general management can be held jointly and personally liable for the full amount when they knowingly failed to secure insurance. The corporate shield doesn’t protect managers who deliberately skip coverage.
Misclassification is the most common route to being accidentally uninsured, and it carries its own penalties. An employer who knowingly misclassifies an employee as an independent contractor faces civil penalties of up to $5,000 per misclassified worker, and repeat offenders face double that.10New York Codes, Rules and Regulations. Maryland Code Labor and Employment 8-201.1 – Failure to Properly Classify Individuals Prohibited Anyone who advises a business to misclassify, such as a consultant or accountant, can be hit with a separate penalty of up to $20,000. Those civil penalties stack on top of the criminal exposure for being uninsured, and the Commission, the Insurance Administration, and the Division of Labor and Industry can each issue their own orders for restitution, interest, and compliance.
If you think you fit one of the exemptions, confirm it in writing before an injury tests the question. File the exclusion form and notify your insurer if you’re opting out as an officer or member. Count your farm payroll against the statutory thresholds. Track the hours of any domestic worker. And if you’re hiring people as independent contractors, make sure the working relationship would survive an audit, not just the contract.