Two brothers in Port Charlotte run a framing company as an LLC. One owns ninety-five percent and the other five, and both swing a hammer on every job. When a general contractor asks for their workers’ compensation, they apply for construction exemptions so neither has to buy a policy. One exemption is approved. The other is denied, because the brother with five percent does not meet the ownership requirement, and the company has been working with an uncovered owner on the job for months.
Florida’s workers’ compensation exemptions are useful, and they are also one of the most misunderstood parts of the system. An exemption is a specific filing with specific limits, not a status a business owner can simply claim, and the rules are very different depending on whether the business is in construction.
What an Exemption Does
An exemption lets a qualifying owner opt out of workers’ compensation coverage for himself or herself. It does not exempt the business, and it does not cover or excuse coverage for anyone else. A company with an exempt owner and even one employee in construction, or four employees outside construction, still needs a policy for those employees.
An exempt owner also gives up the benefits that coverage provides. If that owner is hurt on the job, there are no workers’ compensation benefits for medical care or lost wages, and some health insurance plans exclude or limit coverage for work-related injuries. Owners who do physical work should think about that before filing, rather than treating the exemption as free money.
Non-Construction Exemptions
In a business outside construction, corporate officers and LLC members are counted as employees unless they elect to be exempt. An officer or member files a notice of election with the Florida Division of Workers’ Compensation, and once it is approved, that person is not counted toward the four-employee threshold and is not covered under the policy. That is how a small company with several owners and a few employees can stay below the threshold legitimately.
Sole proprietors and partners in non-construction businesses work differently. They are generally not considered employees in the first place, so they do not need an exemption, but they are also not covered unless they choose to include themselves on a policy. Our article on whether you need workers’ comp in Florida explains how the state counts employees.
Construction Exemptions Have Strict Limits
Construction is where exemptions trip people up. Only corporate officers and LLC members can be exempt, and each must own a minimum percentage of the business, which is why the five-percent brother in the opening was denied. Only a limited number of officers or members in a single company can hold exemptions at the same time, so a construction business with several owners may have to cover some of them even if they all qualify on ownership. The exemption also expires and has to be renewed on a set schedule, and it applies only to the business entity listed on it.
The application asks for proof that the person is an officer or member of an active Florida business entity and meets the ownership requirement, and the business has to be registered properly with the state. Because the rules and fees are set by statute and rule and change over time, confirm the current requirements with the Division before filing.
The Exemption Covers One Person, Not the Crew
This is the misunderstanding that costs contractors the most money. An exemption certificate from a subcontractor confirms that one owner has opted out of coverage for himself. It says nothing about the people working alongside him. If that sub brings a helper, a nephew or a day laborer to the job, those workers are uncovered, and Florida can treat them as the general contractor’s employees.
At audit, the general contractor’s carrier will look for proof of coverage for every subcontractor. An exemption certificate may satisfy the carrier for the exempt owner, but any uncovered workers on that sub’s crew can be added to the contractor’s payroll at the sub’s class rate. That is why many general contractors require subs to carry an actual policy, even a minimum-premium policy with no listed employees, rather than accept an exemption. Our article on the shell company problem in Florida construction explains what happens when a certificate does not reflect who is actually on the job, and our guide to workers’ compensation for Florida contractors covers subcontractor chargebacks in detail.
How to Apply and How to Check
Exemptions are filed with the Florida Division of Workers’ Compensation, and approved exemptions appear in the Division’s public proof of coverage database. That database is what matters. A compliance investigator, a general contractor or a carrier’s auditor will look up the exemption there, not ask the owner whether he believes he is exempt. An exemption that was never filed, was denied or has expired offers no protection, even if the owner has a copy of an old certificate.
It is worth checking the database for your own business periodically, especially before renewing a contract, applying for a license or starting a large job. It is also worth checking it for every subcontractor before they start work, along with their certificate of insurance. Our article on what insurance you need to get a contractor license in Florida covers how exemptions and coverage fit into licensing.
What Happens When an Exemption Is Wrong
An invalid exemption is treated the same as no coverage. If an investigator finds an owner working under an expired or denied exemption in construction, or a business over the threshold because an owner was never actually exempt, the result can be a stop-work order and a penalty based on the premium that should have been paid over a look-back period. Our articles on stop-work orders and what happens when a workers’ comp inspector visits explain how those visits unfold.
An incorrect exemption can also show up at audit. If an owner listed as exempt does not appear in the database, the carrier may add that owner’s payroll to the policy, usually within set minimums and maximums for officer payroll. Our guide to how much workers’ compensation costs in Florida explains how officer payroll is rated.
When an Exemption Is the Wrong Choice
An exemption saves premium, but it is not always the right decision. A working owner in a physical trade who gets hurt has no workers’ compensation benefits and may find that health insurance does not cover the injury either. General contractors, property managers and other customers may require an actual policy regardless of exemption status, which means the business ends up buying coverage anyway. And for a business that is growing, the exemption only delays a requirement that will arrive with the next hire. For some small businesses in high-hazard classes, a professional employer organization can be an alternative; see our article on PEO workers’ comp in Florida.
What Business Owners Should Confirm
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Is your business classified as construction or non-construction?
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Is every owner who claims an exemption a corporate officer or LLC member, and in construction, does each meet the ownership requirement?
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Is each exemption approved, current and showing in the Division’s database?
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Are you within the limit on the number of exempt officers in a construction company?
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Do you have a policy for every employee who is not an exempt owner?
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Have you checked every subcontractor’s coverage or exemption before they start work?
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If you are an exempt owner in a physical trade, how would an injury be paid for?
Workers’ Compensation and Exemptions With Prestige
Prestige Insurance Group places workers’ compensation for contractors and small businesses across Miami, Fort Lauderdale, West Palm Beach, Orlando, Tampa and throughout Florida, and we help owners decide whether an exemption or a policy makes more sense for how they actually work. We work with over 100 MGAs and specialty markets, including carriers that write small and minimum-premium policies for contractors whose customers require one. For the full picture, see our page on workers’ compensation insurance in Florida, and for Spanish-speaking contractors, our guides to la exención de compensación al trabajador and workers’ comp para contratistas. Call the office nearest you. Se habla español.
Miami: 305-969-8776 Orlando: 407-993-2331
General information only, not legal advice. Florida workers’ compensation exemption requirements, ownership thresholds, officer limits, fees and renewal periods are set by statute and rule and change over time. Confirm current requirements with the Florida Division of Workers’ Compensation and consult qualified counsel regarding your obligations.
