Who Is Exempt from Workers’ Compensation in New York?

Who is exempt from workers’ compensation in New York comes down to a short list: sole proprietors, partners, and LLC members with no employees; the officers of a one- or two-person corporation that meets strict ownership rules; clergy and non-manual religious staff; domestic workers under 40 hours per week who don’t live in; genuine independent contractors; and most casual volunteers. Nearly every other employer in the state has to carry coverage, and guessing wrong can cost $2,000 for every ten days without a policy, plus criminal exposure that reaches felony level.¹

Sole Proprietors, Partners, and LLC Members With No Employees

If you run a business alone and have no employees, you don’t need workers’ compensation coverage. The rule works the same way for sole proprietors, general partners in a partnership, and members of an LLC or LLP. None of these owners are treated as employees of their own businesses.²

You can voluntarily opt in by notifying a carrier and paying premiums, and if you do, you receive the same benefits as any covered employee. Whether the premium is worth it depends on your work. A self-employed roofer and a freelance graphic designer face very different risks.³

The exemption disappears the moment you hire anyone. The definition of “employee” sweeps in part-time workers, borrowed and leased employees, family members, and volunteers.⁴ Limited partners who are purely passive investors and do no work are not employees, but a limited partner who starts actually working for the business can be reclassified by the Workers’ Compensation Board.

Corporate Officers in One- or Two-Person Corporations

Corporate officers are generally treated as employees, and the business must cover them. Two situations allow an exclusion.

First, if a corporation has only one or two shareholders who own all of the stock and hold all of the offices, and there are no other workers of any kind, coverage isn’t required at all. “No other workers” is read strictly: no employees, day laborers, leased or borrowed employees, part-timers, other stockholders, unpaid volunteers, family members, or subcontractors.²

Second, if a one- or two-person corporation does have other employees, the officer-shareholders can elect to exclude themselves from coverage by filing Form C-105.51 with the carrier. Each officer must own at least one share, and together they must own all outstanding shares and hold all offices. The election stays in effect until the corporation revokes it.⁵

Officers who elect out can’t claim benefits if they’re hurt on the job. Private health insurance, disability coverage, or savings would be the only backstop, so the premium savings should be weighed carefully in physically demanding work.

Family Members Usually Count as Employees

This is the trap that catches small business owners. In New York, family members providing services to a for-profit business are counted as employees for workers’ compensation purposes, whether or not they get a paycheck.⁶

A spouse helping at the shop on weekends counts. An adult child doing the books without wages counts. The common “they don’t get a W-2” reasoning doesn’t hold up with the Board.

Farms are the one meaningful carve-out. The spouse and minor children (under 18) of a farmer aren’t counted as employees, as long as they aren’t working under an express contract of hire.⁷ A family member can still fit the corporate officer exclusion above, but the exemption flows from the corporate structure, not the family tie.

Domestic Workers Under 40 Hours a Week

For housekeepers, nannies, home health aides, cooks, gardeners, and similar household employees, the dividing line is 40 hours per week for the same employer. At 40 or more hours, coverage is required. Under 40 hours, with no live-in arrangement, it isn’t.⁸

The hour count is broader than most employers expect. For live-in workers, time spent at the residence counts, including sleeping and eating hours. Errands and any work off the premises also count. If an employer goes away for two days and requires the worker to stay at the house, all 48 hours go into the weekly total.

A part-time housekeeper who comes in twice a week for four hours each visit needs no policy. A live-in nanny almost certainly crosses the 40-hour line once sleeping and on-call hours are added in. One more thing worth knowing: a homeowner’s insurance policy cannot provide workers’ compensation coverage. New York’s Insurance Law prohibits that kind of rider, so a separate policy is required when coverage is owed.

Clergy and Non-Manual Religious Staff

Nonprofit religious organizations have a broad exemption, but with strict limits. Coverage isn’t required if the organization pays only clergy, teachers, or people performing non-manual labor. Clergy must be performing only religious duties, and teachers must be performing only teaching duties.⁹

Ordained ministers, priests, rabbis, sextons, Christian Science readers, and members of religious orders aren’t considered employees under the Workers’ Compensation Law.¹⁰

The definition of “manual labor” is wider than most congregations assume. Filing paperwork, carrying books or binders, dusting, vacuuming, playing musical instruments, moving furniture, shoveling snow, and mowing lawns all count. If any paid worker crosses into any of that, the exemption no longer applies and the organization needs coverage. A church secretary who occasionally moves boxes is enough to end the exemption.

Recipients of charitable aid who perform work for a religious or charitable institution are also outside coverage, as long as the work is incidental to the aid and not done under a contract of hire. People working in teaching or non-manual roles for religious, charitable, or educational institutions sit outside the general mandate as well, though the institution can voluntarily elect coverage. Members of supervised amateur athletic activities run on a nonprofit basis are not employees either.¹⁰

Genuine Independent Contractors

Independent contractors aren’t employees, so they fall outside workers’ compensation entirely. Calling someone an “independent contractor” on paper, though, doesn’t make it so. The Board looks at the actual working relationship, and the central question is whether the hiring party has the right to control how the work is done.²

Factors pointing toward employee status include the hiring party setting the schedule, providing tools and equipment, requiring exclusive work for one company, and paying a regular wage rather than per-project fees. Someone can be an independent contractor for tax purposes and still be an employee for workers’ compensation. The Board makes its own call on the facts.

Misclassification is common in construction, transportation, and gig work. Employers caught misclassifying face the same penalties as employers with no insurance at all: up to $2,000 for every ten days of non-compliance, plus possible criminal charges.¹ A genuine independent contractor hurt on the job can’t file a workers’ compensation claim; the fallback is a personal injury lawsuit, which requires proving someone’s negligence caused the injury.

Most Volunteers

Most casual volunteers have no coverage. Helping at a community event, a fundraiser, or a neighbor’s business doesn’t put you inside the system.

Volunteer firefighters and volunteer ambulance workers are the main exception. They’re covered under separate benefit laws rather than the general Workers’ Compensation Law, and political subdivisions must carry insurance providing medical care and wage-replacement benefits for injuries sustained in service.¹¹

Some municipal and nonprofit groups voluntarily carry coverage for their volunteers, but the law doesn’t require it in most cases. At the federal level, the Volunteer Protection Act gives volunteers for nonprofit organizations and government entities some personal liability protection for harm caused within the scope of their responsibilities, provided the harm wasn’t from willful misconduct, gross negligence, or reckless behavior.¹²

Why Getting the Classification Right Matters

The Board monitors insurance status for more than 800,000 employers. If it can’t verify coverage for a period, an inquiry notice goes out, and ignoring it triggers a penalty notice.¹

Civil penalties run up to $2,000 for every ten-day period without coverage, or two times the cost of compensation, whichever is greater. Understating payroll or concealing employee duties to lower premiums carries the same exposure. On top of that, failing to cover five or fewer employees within 12 months is a misdemeanor with fines from $1,000 to $5,000; failing to cover more than five is a Class E felony with fines from $5,000 to $50,000; a second conviction within five years is a Class D felony with fines from $10,000 to $50,000.¹³ If the employer is a corporation, the president, secretary, and treasurer are personally liable, and an uninsured employer still owes all wage and medical benefits awarded to any injured worker, with no policy to absorb the cost. If any of the exemptions above look like a close call for your situation, the cheaper move is almost always to confirm with the Board before relying on it.

1
Workers’ Compensation Board. Violations of Workers’ Compensation Law (Liability and Penalties)
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Workers’ Compensation Board. Workers’ Compensation Coverage For-Profit Businesses
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Workers’ Compensation Board. Workers’ Compensation Coverage Sole Proprietorships
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Workers’ Compensation Board. Limited Liability Company (LLC) or Limited Liability Partnership (LLP)
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Workers’ Compensation Board. Form C-105.51 – Notice of Election to Exclude Executive Officers
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Workers’ Compensation Board. Workers’ Compensation Coverage Family Members
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Workers’ Compensation Board. Farms
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Workers’ Compensation Board. Household Employers (Employers of Domestic Workers)
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Workers’ Compensation Board. Religious Organizations and Charitable Aid
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New York State Senate. New York Workers’ Compensation Law Section 3 – Application
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New York State Senate. New York Code WKC 100 – Insurance Against Liability to Volunteer Firefighters and Ambulance Workers
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Office of the Law Revision Counsel. 42 U.S. Code 14503 – Limitation on Liability for Volunteers
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New York State Senate. New York Workers’ Compensation Law Section 52 – Effect of Failure to Secure Compensation