Workers' compensation is insurance that pays an injured employee's medical treatment and part of their lost wages when they're hurt or made ill by their job, whoever was at fault. In return, the employee generally can't sue the employer over that injury. In the US it's run by each state, not the federal government, so whether you must carry it depends on where your staff work.
That last point is the one that catches small employers out. People search for 'workers comp rules' expecting one national answer, and there isn't one. The US Department of Labor (DOL) says plainly that anyone injured on the job while employed by a private company or a state or local government agency should contact their state workers' compensation board. The federal programs only cover specific groups.
How workers' comp works: the trade-off
California's Division of Workers' Compensation describes it as the nation's oldest social insurance program, adopted in most states in the second decade of the 20th century. It's built on a trade-off. Employees get prompt medical treatment for on-the-job injuries or illnesses no matter who caused them. In exchange, they give up the right to sue the employer over the injury. Employers get predictability; employees get care without a court case.
The DOL lists four types of support that compensation programs provide to the injured worker:
- Wage replacement benefits
- Medical treatment
- Vocational rehabilitation
- Other benefits
California's list for private employers is more specific: medical care, temporary disability benefits, permanent disability benefits, supplemental job displacement benefits and a return-to-work supplement.
Federal vs state: who runs which program
| If the worker is... | Who handles the claim | Source |
|---|---|---|
| A federal employee | DOL Office of Workers' Compensation Programs (Federal Employees' Compensation Program) | DOL |
| A longshore or harbor worker | DOL Longshore and Harbor Workers' Compensation Program | DOL |
| A coal miner with black lung | DOL Federal Black Lung Program | DOL |
| An energy employee with an occupational illness | DOL Energy Employees Occupational Illness Compensation Program | DOL |
| Anyone employed by a private business or a state or local government | The state workers' compensation board or agency | DOL |
The DOL keeps a directory of state workers' compensation officials covering every state, the District of Columbia and the territories, each with its own agency name. In California it's the Department of Industrial Relations; in Florida it's the Department of Financial Services; in Texas it sits inside the Department of Insurance. Same idea, different rulebook.
Do you have to carry it? Three states, three answers
Here's the sourced insight most national guides blur: the rule ranges from 'one employee' to 'optional', depending on the state. These three show the spread.
| State | When coverage is required | Notable detail |
|---|---|---|
| California | Required by law even if you have only one employee | A roofer with no employees must still carry it; out-of-state employers may need it if staff regularly work in California |
| Florida | Construction: one or more employees. Non-construction: four or more. Agriculture: six regular employees and/or twelve seasonal workers | Corporate officers and LLC members count toward the total; contractors become liable for an uninsured subcontractor's workers |
| Texas | Not required for most private employers | Employers without coverage must tell the state they don't have it and report serious injuries, illnesses and deaths |
Texas is the outlier worth understanding. The Texas Department of Insurance says private employers can choose to carry coverage, but it isn't required in most cases. Going without it isn't a free pass, though. A policy limits your liability if an employee sues, except where gross negligence results in a death. Without one, you've kept the right to be sued, and you still have reporting duties: you must report to the state that you don't have coverage, and report to the Division of Workers' Compensation any work-related injury causing more than one day of lost time, plus all work-related illnesses and deaths.
Florida's thresholds also count owners. The Department of Financial Services says business owners who are corporate officers or LLC members are included in the employee count. Non-construction sole proprietors and partners aren't counted as employees unless they choose to be covered, and business owners who meet the requirements can apply for an exemption for themselves.
What employers usually have to do
- Check your state agency's rules using the DOL directory, for every state where you have staff, including remote workers.
- Buy a policy from a licensed carrier (or qualify to self-insure where the state allows it).
- Post or hand out the notices your state requires. California, for example, has a time of hire notice for new employees.
- Report injuries to your carrier promptly. In Texas, covered employers must report injuries causing more than one day of lost time.
- Keep coverage in place when you hire subcontractors. In Florida, if a subcontractor has no coverage, its workers become your employees for an injury.
- Plan the return to work. Texas, for example, points employers to its Return to Work resources for getting injured staff back safely.
If you're hiring for the first time, our guide to E-Verify covers the right-to-work side of onboarding, and our FMLA guide explains the job-protected leave that can run alongside a workers' comp claim.
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What about the UK?
The UK doesn't have a US-style workers' comp system. Instead, GOV.UK says most employers must get Employers' Liability (EL) insurance, which helps pay compensation if an employee is injured or becomes ill because of the work they do for you. As of October 2026, GOV.UK says the policy must cover you for at least £5 million, and you can be fined £2,500 for every day you aren't insured. You must also display your EL certificate where employees can see it, which can be at the workplace, on your website or on your intranet.
There are two exemptions on GOV.UK's list: you only employ a close family member, or you only employ someone based outside England, Scotland and Wales. Our UK right to work check guide covers the other first-hire duty people forget.
The verdict
Don't rely on a national summary. Workers' comp is a state-by-state obligation, and the gap between California's one-employee rule and Texas's opt-out is enormous. Find your state agency in the DOL directory, check the threshold for your industry, and if you're in Texas, weigh the lawsuit exposure before deciding to go without. For most small businesses, the policy is cheaper than the lawsuit it prevents.
Frequently asked questions
Is workers' compensation required by federal law?
No. Federal programs cover federal employees and specific groups such as longshore workers and coal miners. The DOL says people employed by private companies or state and local governments should contact their state workers' compensation board, and each state sets its own rules.
Do I need workers' comp for just one employee?
It depends on the state. California requires it even with only one employee. Florida requires it from one employee in construction but four in other industries, and Texas doesn't require it for most private employers.
Can an employee sue instead of claiming workers' comp?
Generally no. The system trades the right to sue for prompt benefits regardless of fault. In Texas, an employer without coverage loses that protection, and even with coverage a lawsuit is possible where gross negligence causes a death.
Is there workers' compensation in the UK?
Not in the US sense. Most UK employers must hold Employers' Liability insurance instead, and as of October 2026 GOV.UK says it must cover at least £5 million.
