Work Comp: What is an Officer Exemption?
Sure, I can explain! Here is what an officer exemption is and who can have one.
An Officer Exemption is a formal election that lets a corporate officer or LLC member opt out of coverage under their own company's workers' comp policy. It is filed with the Florida Division of Workers' Compensation, not decided internally. It only takes effect once the state approves it and issues a certificate. To file, see "5 Easy Steps: Apply for Officer Exemption."
The rules
- Construction: up to 3 exempt officers or members per business. Each must own at least 10% of the company, shown by a stock certificate or a notarized LLC ownership statement. The filing fee is $50 per exemption.
- Non-construction: up to 10 exempt officers or members. There is no ownership requirement and no filing fee.
- Every exempt officer must complete a short online compliance tutorial before the exemption is valid.
- An exemption lasts 2 years and then has to be renewed. It does not renew automatically.
- These limits and fees are set by the state and can change. Check the state's exemption page before you file.
- Sole proprietors and partners: ask us. Whether they can be exempt depends on your industry and how the business is set up.
Why it matters
- It lowers premium. An exempt officer's pay isn't included in the payroll used to figure your premium, so exemptions can cut costs for owner-operators.
- It is a trade-off. An exempt officer gives up their own workers' comp protection. If that person is hurt on the job, workers' comp won't pay their medical bills or lost wages, and most health insurance plans exclude injuries that happen at work, so the bills could fall on them. See "Exempt Officers and WC Claims."
- An exemption has to be in place before the work happens. It isn't retroactive, so filing after an injury doesn't help.
- Because it expires every 2 years, a missed renewal quietly turns an exempt officer back into a covered employee who generates premium, often without anyone noticing.
How it affects your audit
- At audit, the carrier checks that every officer or LLC member claimed as exempt had a valid, active exemption certificate for the exact dates in question.
- If an exemption lapsed, expired, or was never filed for part of the policy period, that officer's pay is added back into your audited payroll for that period, and your premium goes up.
- Keep a copy of every exemption certificate and the dates it covers.
- This is one of the most common and most avoidable causes of audit premium increases. Check exemption status before your policy renews, not after.
Your payroll system
If you run payroll in iSolved, the Workers' Comp Exempt setting also has to match your exemption. See "iSolved and WC Officer Exemptions."
Sole proprietors, partners, and LLC members
How these owners are treated depends on how the business is organized and its industry.
- LLC members and corporate officers can usually apply for an exemption in Florida.
- Sole proprietors and partners are often not eligible to be exempt, and in many cases are not counted as employees unless they choose coverage. This varies, so ask us.
- Owners who want coverage can often be added through an endorsement.
Send us your business type and we will tell you what applies. See "Work Comp: Endorsements" for coverage options for owners.
If an exemption expires or lapses
An exemption lasts 2 years and does not renew automatically. If it lapses, the officer is treated as a covered employee and their pay can be added back to your payroll at audit, with the premium that goes with it.
- Check the expiration date on your certificate now.
- Renew online before it expires.
- Send us the new certificate.
- Update the iSolved Workers' Comp Exempt setting if it applies to you.
If it has already lapsed, contact us so we can look at your options and help limit the impact.
If you have any questions, please feel free to contact us at workcomp@ibusinesssolutions.com or call (941) 487-7275, ext. 3. Our business hours are 9:00am-5:00pm EST.