What Is the Virginia Workers’ Compensation Act?

The Virginia Workers’ Compensation Act requires almost every employer with more than two workers to carry insurance that pays medical bills and replaces lost wages when someone is hurt on the job, and in exchange it shields the employer from most injury lawsuits. The threshold is low, the counting rules sweep in people you might not consider employees, and the penalties for getting it wrong are severe. Here is what the Act asks of you and what it gives you back.

Who Must Carry Coverage

Any Virginia business with more than two employees must maintain workers’ compensation insurance. The headcount includes full-time, part-time, and seasonal workers, corporate officers, LLC managers, and family members on the payroll. Officers and LLC managers count unless they have formally opted out.¹

Subcontractors complicate the count. When you hire subcontractors, their employees count alongside yours for purposes of the two-employee threshold, even if each subcontractor carries their own policy. Your carrier can also charge you premium for any uninsured subcontractor you bring on, including a sole proprietor working alone. Collecting a current certificate of insurance from every subcontractor is the easiest way to avoid surprise charges at audit.²

Who counts as an employee versus an independent contractor matters here too. Virginia’s Act defines employees broadly to include anyone working under a written or implied contract of hire. The IRS evaluates the relationship on three dimensions: behavioral control over how the work is done, financial control over payment and expenses, and the type of relationship reflected in contracts, benefits, and permanence.³ Calling a worker a contractor who functions as an employee creates both back-premium exposure and the penalties described below.

The Trade: Guaranteed Benefits for Lawsuit Immunity

Workers’ compensation is a bargain. Employees get medical care and partial wage replacement without having to prove the employer was at fault. In return, those statutory benefits are the employee’s only remedy. Virginia law states that when an insured employer’s worker accepts benefits under the Act, those rights replace all other legal claims, including suits for pain and suffering or punitive damages.⁴

That shield only exists if you carry insurance. An uninsured employer loses the exclusive-remedy defense entirely, and the injured worker can sue in civil court for the full range of damages the workers’ compensation system would never have paid.

What the Policy Pays

An employee who cannot work at all because of a job-related injury receives weekly benefits equal to two-thirds of their average weekly wages, floored at 25 percent of the statewide average weekly wage and capped at 100 percent of it. The Commission publishes the current maximum each year.⁵

Payments do not start on day one. Virginia imposes a seven-day waiting period, counting any day or partial day the employee cannot earn full wages because of the injury. If the day of injury is not a full paid day, it counts as day one. The days do not have to be consecutive.⁶

Medical treatment is covered in full for as long as it is reasonable and necessary: office visits, surgery, prescriptions, and rehabilitation.⁷

What To Do When a Worker Is Hurt

The employee has 30 days from the accident to tell you about an injury, and 60 days from a physician’s diagnosis to report an occupational disease.⁸

Once you know about the injury, notify your insurance carrier immediately. Since 2008, the First Report of Injury goes to your insurer’s claim administrator, who then reports to the Virginia Workers’ Compensation Commission (VWCC) rather than the employer filing directly.⁹ Keep a record of every workplace injury or death, regardless of severity.¹⁰

Notice to you is not the same as a filed claim. To protect their rights, the employee must separately file a Claim Form with the VWCC within two years of the accident, even if you or your carrier are already paying voluntarily. For most occupational diseases, the deadline is two years from the physician’s communication that the condition is work-related, with an outer limit of five years from the last workplace exposure.⁸

Ongoing Employer Duties

Posting Notice

Every covered employer must conspicuously post VWC Form 1 in the workplace, confirming coverage and identifying the insurance carrier.¹⁰

The Physician Panel

You must give an injured employee a panel of at least three physicians, and the employee picks the treating doctor from that list. This is one of the few points in the process where you have real influence. Panel physicians experienced with workplace injuries and return-to-work protocols tend to shorten claims. Give the treating physician a written job description that spells out the physical demands of the regular job and what modified-duty work you can offer.⁷

Return-to-Work

The Act doesn’t require a formal return-to-work program, but a good one is the single most effective way to control claim cost. An employee at home on benefits costs more each week, and longer absences correlate with higher rates of permanent disability. The elements that work: a written policy, early contact with the injured worker (within the first day), regular communication during recovery, and modified-duty assignments that match the physician’s restrictions. Modified duty should mean real tasks the employee can perform, not invented busywork.

Self-Insurance as an Alternative

Larger employers can apply to pay claims directly instead of buying a commercial policy. The VWCC must find you financially capable of meeting all compensation obligations before approving the application.¹¹

Expect to submit audited financial statements for the most recent three years, a claims history covering open claims and the last three policy years, and a $200 nonrefundable filing fee. Review takes roughly 90 days. You must post a security bond of at least $750,000 (most approved self-insurers post more), the Commission may require excess insurance, and subsidiaries typically need a parental guarantee. Self-insurers also pay an annual assessment on calculated manual premium, split between the Administrative Fund and the Uninsured Employer’s Fund.¹² For most small and mid-size employers, a commercial policy is the more practical path.

Where Federal Law Layers On

A serious workplace injury rarely sits inside workers’ compensation alone. Three federal statutes commonly apply at the same time, and handling the overlap wrong creates liability no workers’ compensation policy covers.

FMLA

An injury that hospitalizes an employee or keeps them out more than three days with continuing medical treatment generally qualifies as a serious health condition under the Family and Medical Leave Act. You can run FMLA concurrently with the workers’ compensation absence, but you must follow FMLA’s notice and designation rules to do so. If the treating physician clears the employee for light duty and you offer a position, the employee may decline it and remain on unpaid FMLA leave until cleared for the original job or the 12 weeks run out.¹³

ADA

If the injury leaves a lasting impairment that substantially limits a major life activity, the Americans with Disabilities Act may require reasonable accommodations. The duty is ongoing, and you cannot discharge it by offering temporary light duty and then terminating the employee when restrictions become permanent. Requiring a worker to be “100 percent healed” before returning is treated as unlawful under disability discrimination law. Evaluate case by case whether the employee can perform the former job with or without accommodation, or whether reassignment to a vacant position is feasible.

OSHA Recordkeeping

Separate from workers’ compensation reporting, federal OSHA requires employers with more than ten employees to keep injury and illness records on Forms 300, 300A, and 301, retained for five years. Post the annual summary (Form 300A) in a visible workplace location from February 1 through April 30 each year. Establishments with 100 or more employees in designated high-hazard industries also submit injury data electronically through OSHA’s Injury Tracking Application. OSHA uses that data to target inspections, and both unusually high and suspiciously low rates can draw scrutiny.¹⁴

Disputes and Appeals

Either side can request a hearing before the VWCC when a claim is contested. Common fights are over whether the injury is work-related, what treatment is reasonable, and whether the employee has recovered enough to return. An employer or insurer can also file an Application for Hearing to suspend or terminate benefits under an existing award.¹⁵

A deputy commissioner hears the evidence and issues a written decision. A dissatisfied party can request review by the full Commission, and from there appeal to the Virginia Court of Appeals within 30 days. One point that matters for employers: filing an appeal suspends the award, so disputed payments are not required while the appeal is pending.¹⁶

Penalties for Noncompliance

Virginia’s penalties stack. The financial exposure almost always exceeds what insurance would have cost.

An employer that fails to maintain required coverage faces a civil penalty of up to $250 per day, capped at $50,000. Fines run from the date coverage should have been in place, so a business that operates uninsured for several months can reach the cap before anyone is hurt.¹⁷

If noncompliance continues after a Commission finding and 15 days’ written notice by certified mail, the VWCC can order you to stop all business operations until you obtain coverage. A cease-and-desist order effectively shuts the business down.¹⁷

Knowingly and intentionally operating without required coverage is a Class 2 misdemeanor, carrying potential jail time and additional fines.¹⁸

And the biggest exposure is the loss of exclusive remedy. An uninsured employer can be sued in civil court for the full range of damages, including pain and suffering, emotional distress, and punitive damages. A single serious injury can produce a verdict that dwarfs years of premiums.⁴

Tax Treatment of Premiums

Workers’ compensation premiums are deductible as an ordinary business expense under federal tax law, whether you buy a commercial policy or self-insure through a third-party administrator. Sole proprietors take the deduction on Schedule C; partnerships, LLCs, and corporations take it on the applicable business return. Self-insured employers can also deduct benefits paid directly to employees. The deduction doesn’t eliminate the cost, but it meaningfully reduces the after-tax price of compliance.

1
Virginia Code Commission. Virginia Code Title 65.2 – Workers’ Compensation
2
Virginia Workers’ Compensation Commission. Workers’ Compensation Insurance Information for Employers
3
Internal Revenue Service. Independent Contractor (Self-Employed) or Employee?
4
Virginia Code Commission. Virginia Code 65.2-307 – Employee’s Rights Under Act Exclude All Others; Exception
5
Virginia Code Commission. Virginia Code Title 65.2 – Workers’ Compensation (PDF)
6
Virginia Code Commission. 16VAC30-50-100 – Rule 9 – Payment of Compensation
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Virginia Code Commission. Virginia Code 65.2-603 – Duty to Furnish Medical Attention, Etc., and Vocational Rehabilitation
8
Virginia Workers’ Compensation Commission. Injured Workers
9
Virginia Workers’ Compensation Commission. First Report of Injury
10
Virginia Workers’ Compensation Commission. Employers
11
Cornell Law Institute. 16 Va. Admin. Code 30-80-20 – Requirements for Individual Self-Insurance
12
Virginia Workers’ Compensation Commission. Overview of Self-Insurance Requirements
13
eCFR. 29 CFR 825.702 – Interaction with Federal and State Anti-Discrimination Laws
14
eCFR. 29 CFR Part 1904 – Recording and Reporting Occupational Injuries and Illnesses
15
Virginia Workers’ Compensation Commission. Employer’s Application for Hearing
16
Virginia Code Commission. Virginia Code 65.2-706 – Conclusiveness of Award; Appeal
17
Virginia Code Commission. Virginia Code 65.2-805 – Civil Penalty for Violation of 65.2-800, 65.2-803.1, and 65.2-804
18
Virginia Code Commission. Virginia Code Title 65.2 Workers’ Compensation 65.2-806