Workers' compensation insurance in Massachusetts: who needs it and how it works.

Is workers’ comp required in Massachusetts?

Yes. All employers operating in Massachusetts are required to carry workers’ compensation insurance for their employees, and for themselves if they are an employee of their own company. The requirement applies no matter the number of hours worked or the number of employees. One part-time hire triggers it.

The only hours-based exception is for domestic employees, who must work at least 16 hours a week to be covered under a policy. Beyond that, the Division of Insurance frames three narrow carve-outs: individuals employing people to work on their own homes, non-profit corporations with no paid staff, and corporations in which every employee is an officer or director who owns at least 25% of the corporation and has given up the right to benefits.

Under M.G.L. c.152 §25A, an employer must provide compensation through a policy from an authorized insurer, membership in a licensed self-insurance group, or a self-insurance license backed by a deposit or surety bond of at least $20,000 plus reinsurance of at least $500,000. For nearly every small and mid-sized employer, that means buying a policy.

Who is exempt: sole proprietors, partners, and corporate officers

Members of an LLC, partners of an LLP, and sole proprietors of an unincorporated business are not required to carry coverage for themselves. That is the whole of the owner exemption. Employees who are not members or partners must still be covered.

Sole proprietors and partners who want protection can buy coverage for themselves as well as for their workers. A sole proprietor also has the option of a less expensive policy covering only employees. WCRIBMA set the payroll basis used to rate covered sole proprietors at $70,000 effective October 1, 2025, so the cost of covering yourself is predictable.

Corporate officers work differently. An officer who owns at least 25% interest can request an exemption by filing Form 153, the Affidavit of Exemption for Certain Corporate Officers or Directors, with the DIA. All eligible officers must sign it. Form 153 can be mailed, emailed, or faxed to the Office of Investigations, and the DIA publishes a public list of exempted officers. The exemption never reaches an employee who is not a corporate officer.

Out-of-state employers and worker misclassification

If your company is based elsewhere but sends people to work in Massachusetts, you must provide coverage for all employees working in the Commonwealth. The clean way to do this is to list Massachusetts in section 3A of the policy information page. If Massachusetts appears only under section 3C all-states coverage, your insurer has to submit Form 154 to verify the coverage.

Misclassification is where employers get caught. M.G.L. c.149 §148B presumes a worker is an employee unless three tests are all met: the individual is free from your control and direction, the service is performed outside the usual course of your business, and the person is customarily engaged in an independently established trade or business. Calling someone a contractor does not make it so. Fail any prong and that worker is an employee who should have been on your comp policy, and misclassification in violation of c.152 carries penalties and potential debarment.

What happens if you don’t carry it: stop work orders, fines, debarment

The DIA Office of Investigations issues a stop work order to any employer without coverage, and under M.G.L. c.152 §25C the order takes effect immediately upon service. There is no grace period.

Minimum fines are $100 per day, including weekends and holidays, beginning on the date the order was issued. They accrue daily until coverage starts and the fine is paid. An employer that does not appeal must close down immediately and stay closed until it shows proof of coverage and pays the fines.

You may appeal within 10 days of service and keep operating during the appeal, but the penalty rises to $250 per day if the violation is confirmed. Section 25C requires a hearing within 14 days of the appeal, and a further court challenge means escrowing the assessed penalty or posting a bond at 125% of the assessed amount. Criminal exposure for failing to insure is a fine of up to $1,500, imprisonment for up to one year, or both.

The collateral damage lasts longer than the fine. Violators are debarred from bidding on state or municipal contracts for three years, and the DIA publishes the debarment list. Section 25C also directs licensing agencies to withhold the issuance or renewal of any business or building permit until the applicant shows acceptable evidence of compliance.

How Massachusetts sets your premium

The DIA does not set rates or classification codes. Those come from the Workers’ Compensation Rating and Inspection Bureau of Massachusetts (WCRIBMA) and the Division of Insurance. WCRIBMA is the licensed rating organization: it maintains class codes and rating values, administers experience rating, and files rates with the Commissioner of Insurance, who disapproved the WCRIBMA rate filing for July 1, 2025 effective rates.

Your size determines how your losses affect your price. A risk qualifies for intrastate experience rating when the last two years of the experience period produce at least $11,000 in premium, or an average annual premium of $5,500 with more than two years of data. A smaller risk gets a merit rating when its average annual premium over the last three years is $500 or more but below the experience-rating threshold. You can look up your experience modification through WCRIBMA’s Experience Rating History tool.

Once a policy is bound, an insurer can cancel mid-term for only three reasons: non-payment of premium, fraud or material misrepresentation, or a substantial increase in the hazard insured. If you dispute a premium audit, the challenge goes first to the WCRIB in writing, with 30 days to appeal its finding to the Division of Insurance. Class codes, payroll estimates, and the experience mod all belong on your commercial insurance renewal checklist. This is one of the places a broker earns its keep. We shop your class codes and audit exposures across carriers so you are not paying on payroll that belongs in a cheaper code. See how we handle Workers’ Compensation.

When you can’t get coverage: the assigned risk pool

Some employers cannot buy coverage in the voluntary market because of their industry, loss history, or newness. Massachusetts has a backstop. The Massachusetts Workers’ Compensation Assigned Risk Pool (MWCARP) is the residual market, administered by WCRIBMA, and it must provide coverage to any employer entitled in good faith to workers’ comp that could not obtain it voluntarily.

An agent can apply to the pool after two carriers decline the account. The pool assigns it to a servicing carrier at the same rates, though certain premium discounts may not be available. The pool is not a permanent home. Employers paying over $5,000 a year in premium can often be placed back in the voluntary market, and pool employers can earn premium credits of up to 15% for hiring a Qualified Loss Management firm. If you have been declined, this is worth talking through as part of a broader commercial review.

What the policy actually pays an injured worker

The premium buys wage replacement and medical care. Temporary total incapacity pays 60% of the worker’s gross average weekly wage, capped at the state average weekly wage, for up to 156 weeks, and applies once the worker is unable to work for six or more full or partial calendar days, which need not be consecutive. Under M.G.L. c.152 §29, compensation runs from the sixth day; the first five days are unpaid unless the incapacity lasts 21 days or more, in which case payment runs from onset.

Partial incapacity under §35 pays 60% of the difference between pre-injury wage and post-injury earning capacity, capped at 75% of the temporary total rate, for up to 260 weeks. Permanent and total incapacity under §34A pays two-thirds of the average weekly wage with cost-of-living adjustments for as long as the disability continues. Rates reset each October 1; effective 10/1/25 the maximum weekly rate is $1,922.48 and the minimum is $384.50.

Medical benefits cover reasonable care, prescription reimbursement, and travel to and from visits for as long as treatment is required. The employer may direct the first visit within its preferred provider arrangement, after which the employee chooses providers. A surviving spouse receives two-thirds of the deceased worker’s average weekly wage, up to the state average weekly wage at the time of injury, with cost-of-living adjustments starting two years after the injury.

Proof of coverage and notice to employees

Buying the policy is not the last step. M.G.L. c.152 §21 requires an insured employer, as soon as coverage is secured, to give written or printed notice to everyone under contract of hire that it has provided for payment to injured employees. The DIA Office of Investigations also runs an online tool that lets anyone verify a business’s proof of coverage, and it publishes lists of exempted officers, self-insured employers, and self-insurance groups.

Getting the classification, the exemptions, and the section 3A listing right the first time keeps you off the enforcement radar. That is the work we do when we place a policy.