Iowa law mandates that any person or business with employees must carry Workers Compensation Insurance. The penalty for not complying is a Class D Felony punishable by up to 5 years in jail and a $7,500 fine. Surprised?
So, what constitutes an employee? Well, really anyone that is hired by a person or business to perform a job. If an employee works even one hour per week you need to carry workers compensation insurance for that employee. This would not include an independent contractor, as long as that contractor is not performing duties as an employee. Like any law, some exceptions have been made. These include:
1. Limited exemptions for those in agriculture
2. Limited exceptions to those employed by a relative
3. Limited exemptions for casual employment (not part of a trade or business)
4. Owners, Members, and Partners of a business can exclude themselves.
Workers compensation insurance is meant to protect employees in the event they are harmed during their normal work duties. It provides funds for medical care and other expenses the employee may have arising out of a workplace injury. The cost of work comp insurance can vary greatly from a few hundred dollars to several hundred thousand dollars per year, depending on the scope of work and the payroll of the employees.
Not only does Iowa law mandate this coverage, but insurance companies will often deny to write a work comp insurance policy if a business has had an employee working for any length of time without workers comp in place. This often puts the employer between a rock and a hard place and will often kick them into the assigned risk pool. This can cause their premiums to increase significantly.
Before you hire your first employee, contact your insurance agent to get a quote on workers compensation insurance and have a policy ready to be put in place the day the new employee starts.