Non-Construction

Employers working in Tennessee (that are not in the construction industry) with five or more employees must secure workers’ compensation insurance coverage for their employees either by purchasing a policy from a licensed workers’ compensation insurance carrier or by qualifying as a self-insured employer through the Department of Commerce and Insurance, Self-Insured Division.

Who’s Considered an Employee?

Workers are identified as employees based on their working relationship with the business entity. Minors, working family members, and part-time employees are included when determining the total number of employees for a business. 

The Bureau uses a seven-factor test to determine if a worker would be classified as an employee or an independent contractor.

1. The right to control the conduct of the work
2. The right of termination
3. The method of payment
4. The freedom to select and hire helpers
5. The furnishing of tools and equipment
6. Self-scheduling of working hours
7. The freedom to offer services to other entities

Even if a worker is provided an IRS Form 1099 instead of a W2, that does not mean they are properly classified for purposes of workers’ compensation. Each of the seven-factors is considered with significant weight given to who controls the conduct of the work.

Employee Count

Non-construction business entities that are classified as a sole proprietorship, limited liability company, or partnership, business owners are not included in the count to determine if a business has five or more employees.

Corporate officers that work full time for the business are included in the count of employees, but they are eligible to exclude themselves from being included on the workers’ compensation policy.

Out-of-State Employers

Employers who are based in other states but have employees working in Tennessee may be subject to the workers’ compensation law. This work may not be automatically covered by other state’s workers’ compensation policy. It’s important to ensure that they are properly covered for work performed in Tennessee.

When Tennessee Law Applies 

Tennessee's Workers' Compensation Law applies if any one of these are true:

• The employment was principally localized within Tennessee.
• The contract of hire was made in Tennessee
• At the time of the injury, the worker was a Tennessee resident and there was a substantial connection between Tennessee and the employer-employee relationship.

If your business is based outside of Tennessee, but you have an employee working in Tennessee, we recommend that companies with five or more employee(s), with at least one working in Tennessee, ensure that their workers’ compensation policy lists “Tennessee” in section 3A.

Extraterritorial Application 

Generally, if an employee is only working temporarily in Tennessee (no more than 14 consecutive days or 25 total days in a calendar year) they and their employer may be exempt from Tennessee's workers' compensation laws if the employer has workers' compensation insurance coverage in another state.

Exceptions

Certain employers or employees are not covered by Tennessee workers' compensation insurance laws. These employers may voluntarily provide workers' compensation coverage or an alternative on the job injury program.

• Employers with Fewer Than Five Employees: Non-construction businesses with fewer than five regularly employed individuals.
• Interstate Common Carriers: Companies engaged in interstate commerce (e.g., railroads, trucking) that are already regulated by federal workers' compensation laws, except for those employees that are not covered by the Federal law. Leased operators or owner-operators of motor vehicles under contract to a common carrier are generally not considered employees, but may elect to be covered under the common carrier’s policy via a written agreement.
• Casual Employment: Individuals employed for tasks outside the employer's regular trade, business, profession, or occupation.
• Domestic Servants: Household employees and their employers.
• Farm and Agricultural Laborers: Farm workers and their agricultural employers.
• Government Entities (State, Counties, Municipalities): The State of Tennessee, counties, and municipal corporations.
• Volunteer Ski Patrol: Individuals performing voluntary ski patrol services who receive only meals, lodging, or ski lift access as compensation.

Reducing Workforce

If an employer has five or more employees and its workforce drops below five, the employer may elect to drop its workers' compensation coverage.  The employer must file a Notice of Withdrawal from Coverage of the Tennessee Workers' Compensation Law (Form I-3) to drop the coverage with the Bureau. The employer will be exempt from the coverage requirements and will not be required to provide workers' compensation coverage after the Bureau has accepted the form.