Prior to its 1983 amendment, the Workers Compensation Act generally favored the injured employee.  An injured party’s common-law rights were retained unless the Act clearly modified those rights.  In 1983, the Act was amended to be applied on an “even-handed basis”, which ensured neither party received preferential treatment. This standard remains in effect today.  Employers should not mistake the more employer-friendly standard as an opportunity to skirt or circumvent the law.

The Workers Compensation Act in Minnesota

In Minnesota, the act requires all employers, except the state and municipalities, to carry workers’ compensation insurance, unless the employer qualifies for self-insurance (this is often referred to as mandatory coverage).

  • Employees are generally defined as persons performing services for another for hire, including minors and noncitizens.
  • An employer is generally defined as an individual or business that hires an individual to perform services.

The Act provides multiple exceptions to the mandatory coverage rule. However, these exceptions are only applicable in certain circumstances.

Exception for Businesses Without Employees

Some business entities have no employees and are not employers. Thus, these entities have no one to insure. Partners in a business or farm operation may be exempt if every employee is a partner or qualified relative.

Sole proprietorships are non-incorporated businesses owned by one person. If the sole proprietorship has no employees, the business does not need to comply with the act. That said, entrepreneurs are warned not to view sole proprietorships as a “free pass” from regulations.

A sole proprietorship is a business entity that fails to provide the owner with any liability protection. Entrepreneurs should avoid sole proprietorships at all costs. In addition, managers or members of limited liability companies and executive officers of closely held corporations may be excluded from the workers’ compensation requirement if certain requirements are met.

Workers’ Compensation Insurance

Workers’ compensation insurance may be purchased through an insurance agent or directly from an insurance company.  Minnesota has several thousand licensed insurance agents who sell workers’ compensation insurance, so you have plenty of options to choose from.  In Minnesota, work comp insurance is sold through open competition, which means insurance companies establish their rates and compete for business.  The workers’ compensation polices provide coverage mandated by state law. Thus, only price, quality of service, and customer service varies and employers could have significant savings by receiving multiple price quotes for the insurance.

Workers’ Compensation insurance provides compensation to employees who suffer a work-related injury or disease.  Compensation includes partial wage replacement and full payment of medical and vocational rehabilitation costs. In case of death, workers’ compensation benefits are paid to the employee’s dependents. Workers’ compensation insurance companies and self-insured employers pay these benefits and collect the premiums. The Minnesota workers’ compensation law was designed to standardize benefits, reduce litigation, and encourage early rehabilitation intervention, healthy employee and employer relationships, and return-to-work programs.

Workers Compensation Act Violations

If an employer fails to comply with the act the failure may result in any of the following:

  • Litigation
  • Civil fines and penalties
  • Criminal charges

An employer suspected of violating the statute will be investigated by the Special Compensation Fund unit.  Even if an employee was not injured, an employer found in violation of the act may be fined by the Minnesota Department of Labor & Industry. An employer in violation of the act will be ordered to provide the necessary insurance coverage and refrain from employing any person, at any time, without issuing the proper insurance.  In addition, the employer may be penalized up to $1,000 per employee for each week the employee was not insured.

In addition, if an employer receives a commissioner’s order, the employer has ten days to comply or contest the order.  If an objection is not received by the commissioner by the deadline, the order will be considered final and the employer cannot appeal.  If, however, the employer contests the order, the dispute will be resolved by a workers’ compensation judge. The judge shall determine whether the fine and order is justified.  If the employer is found in breach of the act, the employer will be required to pay the order’s fines and may be penalized by additional fines if the uninsured people were employed while the case was in dispute.

In addition to costly fees and penalties, an employer found to have willfully and intentionally failed to comply with the act is guilty of a gross misdemeanor. In Minnesota, a gross misdemeanor is punishable with a fine up to $3,000.

Violation Remedies for Employees

If an employer has not purchased insurance coverage or failed to comply with self-insurance requirements and an employee suffers a compensable injury, the employee has multiple remedies. The injured employee may either pursue the employer in tort or request the Minnesota Special Compensation Fund pay the appropriate benefits.  After a request has been made, a judge will determine the employer’s liability and if the compensation fund is appropriate.  If the compensation benefit is awarded, the judge will order the employer to reimburse the Special Compensation Fund and will be penalized in the amount of 65 percent of the total cost of the benefits.

In Minnesota, a workers’ compensation claim is valid even if the employer goes out of business. Courts have routinely held that if an employer ceases to exist, the fault does not lie with the employee and it should not affect the employee or their dependents.