Workers’ compensation election for sole proprietors, partners and LLC members

How does the workers’ compensation law treat sole proprietors, partners and LLC members?

Sole proprietors and partners have always been considered employers, not employees; and, prior to April 13, 2000, did not have the option to obtain workers’ compensation coverage. However, prior to April 13, 2000, members were treated as employees of a limited liability company and workers’ compensation coverage was mandatory for them. h is was because the New Jersey Compensation Rating and Inspection Bureau viewed LLC members as analogous to executive offi  cers of a corporation.

Chapter 383, P.L. of 1999, not only gave sole proprietors and partners the option to purchase workers’ compensation insurance for themselves eff ective April 13, 2000, it also placed LLC members in the same category. LLC members are no longer subject to mandatory coverage, but may  elect coverage the sameas sole proprietors and partners.


When can I elect coverage?

An election of coverage may be made upon an initial application for coverage, or upon the renewal of your current workers’ compensation policy. You may not elect to be covered midterm


How do I elect coverage?

You will need to complete a Notice Of Election form that simply requires the names of the persons electing coverage, their estimated annual wage, and a description of their duties. We will be happy to assist you in completing this form.


Can only some of the partners or members elect coverage?

No. In order to elect coverage, all of the partners or all of the LLC members must elect the coverage.

Can an election of coverage be rescinded at any time?

No.  The election cannot be rescinded during the policy period. h erefore, if you wish to discontinue the election, you would have to do so upon renewal or upon application for new coverage.


How much will it cost if I elect coverage?

You will be required to pay a premium based on the remuneration of the sole proprietor, or all partners or members (subject to a minimum and maximum amount per person).


If I don’t elect this coverage, will this affect my eligibility for other health benefits?

No. When coverage has not been elected, benefi ts available under any accident or health policy will not be aff ected (according to the law).


Does this election affect my obligation as an employer to provide workers’ compensation insurance to  my employees?

No.  this election does not alter your insurance obligations for employees. You must continue to insure your employees under a workers’ compensation policy, regardless of your choice of election.