Before its 1983 amendment, the Minnesota Workers’ Compensation Act largely favored injured employees. At that time, an injured worker’s common-law rights remained intact unless the Act explicitly modified them. The 1983 amendment shifted the law to an “even-handed” standard—ensuring neither party received preferential treatment. While this balance remains today, employers should not interpret the shift as a license to avoid or undermine compliance with the Act.
The Workers’ Compensation Act in Minnesota
Under Minnesota law, nearly all employers—except for the state and municipalities—must carry workers’ compensation insurance unless they qualify for self-insurance. This requirement is often referred to as “mandatory coverage.”
- Employees: Generally defined as individuals performing services for another for hire, including minors and noncitizens.
- Employers: Defined as individuals or businesses that hire workers to perform services.
There are, however, specific exceptions to the mandatory coverage rule that apply only under limited circumstances.
Exception for Businesses Without Employees
Some businesses have no employees and therefore no obligation to carry workers’ compensation coverage. Partners in a business or farm operation may be exempt if all workers are partners or qualifying relatives.
Sole proprietorships—non-incorporated businesses owned by one person—are also exempt if they have no employees. However, business owners should not see this as a “free pass” from regulation. Sole proprietorships offer no liability protection to the owner and should generally be avoided.
Managers or members of limited liability companies (LLCs) and executive officers of closely held corporations may also be excluded from workers’ compensation coverage if certain statutory conditions are met.
Workers’ Compensation Insurance
Workers’ compensation insurance can be purchased through an insurance agent or directly from an insurer. Minnesota has thousands of licensed agents offering coverage. Because Minnesota operates under an open-competition system, insurance companies establish their own rates and compete for business. The core coverage is standardized under state law—only factors like service quality and pricing differ. Employers can often save significantly by comparing multiple quotes.
Workers’ compensation insurance provides benefits to employees who suffer a work-related personal injury or occupational disease. These benefits include partial wage replacement and full payment for medical and vocational rehabilitation costs. In cases of death, benefits are paid to dependents. Insurers and self-insured employers pay these benefits and collect premiums. The Minnesota workers’ compensation law was designed to standardize benefits, reduce litigation, and promote early rehabilitation and return-to-work programs.
Workers’ Compensation Act Violations
Employers who fail to comply with the Act may face serious consequences, including:
- Litigation
- Civil fines and penalties
- Criminal charges
Violations are investigated by the Special Compensation Fund unit. Even if no employee injury has occurred, noncompliant employers can still be fined by the Minnesota Department of Labor and Industry. Employers may be ordered to obtain proper insurance and stop employing anyone until coverage is secured. Penalties can reach up to $1,000 per employee for each week of non-coverage.
Once a commissioner’s order is issued, the employer has ten days to comply or contest it. Failure to respond makes the order final and unappealable. If the employer contests, a workers’ compensation judge determines whether the fine and order are justified. Employers found in violation must pay the penalties—and may incur additional fines if they continued employing workers without coverage during the dispute.
Knowingly and willfully failing to comply with the Act constitutes a gross misdemeanor in Minnesota, punishable by fines of up to $3,000.
Remedies for Employees When Employers Violate the Act
If an uninsured employer fails to meet its obligations and an employee suffers a compensable injury, the employee has multiple options. They may pursue a tort claim directly against the employer or request payment from the Minnesota Special Compensation Fund. A judge will then determine whether the employer is liable and if compensation from the Fund is appropriate. If the Fund pays benefits, the employer must reimburse it and may be penalized up to 65% of the total benefit cost.
Importantly, in Minnesota a valid workers’ compensation claim remains valid even if the employer goes out of business. Courts consistently hold that a company’s closure does not void an employee’s right to benefits or their dependents’ entitlement.