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When is Worker’s Compensation Insurance Required in Iowa?

Article written by Attorney Kevin O'Flaherty
Updated on
August 17, 2020

In this article, we discuss the law regarding Iowa employers worker’s compensation insurance requirement and answer the following questions:

  • How is an employee/employer relationship established for work comp purposes in Iowa?
  • When is worker’s compensation necessary in Iowa?
  • When are Iowa employers exempt from obtaining worker’s compensation insurance?
  • Do out of state employers have to provide Iowa worker’s compensation insurance?
  • What happens if an Iowa company does not obtain worker’s compensation insurance?
  • How can an Iowa company obtain worker’s compensation insurance?

How is an Employee/Employer Relationship Established For Work Comp Purposes in Iowa?

A proper worker’s compensation claim first requires a proper employee/employer relationship to be established. This is normally something that happens at the outset of an employer hiring a new worker. Whether a worker is considered an independent contractor or an employee of the company is a critical distinction for the necessity of worker’s compensation insurance, as companies are not required by law to provide worker’s compensation benefits to independent contractors. For more information on employees versus independent contractors in Iowa check out this article.

An “employer” in Iowa can be considered any of the following:

  • Any individual, firm, public or private corporation who has one or more persons in service for the company or under direct hire by the company
  • The State of Iowa, each county, city, village, municipality, school district, etc.

When is Worker’s Compensation Necessary in Iowa?

Iowa Worker’s Compensation Law Chapter 87 states that every employer is subject to providing worker’s compensation for its employees unless an exemption applies. However, Chapter 87 also describes how employers can opt-out of providing worker’s compensation but can face multiple civil penalties and will be liable for the entirety of an employee’s work-related injury and the short and long-term effects of that injury. The clear advantage of obtaining worker’s compensation insurance is to protect the company from liability, including costly medical bills and possible legal ramifications if an employee gets injured.

When are Iowa Employers Exempt From Obtaining Worker’s Compensation Insurance?

Iowa code 85 and 87 describe exemptions to obtaining worker’s compensation. Determining specific exemptions under the code can be complex and requires detailed knowledge of Iowa worker’s compensation law not coverable in this article, but below are a number of examples:

  • Independent Contractors;
  • Person’s earning less than $1,500 in a year from a given employer;
  • An individual whose “employment” is purely casual and not for the trade or improvement of the employer;
  • Certain agricultural workers;
  • Certain family members employed by other family members;
  • Certain partner, officer, etc, positions (these individuals can still be covered if the employer elects to provide coverage under their worker’s compensation agreement)

Does an Out of State Employer Have to Provide Worker’s Compensation Insurance in Iowa?

Regardless of the location of the company, if an employee 1) is injured while working in Iowa, 2) has work principally located in Iowa, or 3) was originally hired in Iowa, worker’s compensation coverage that includes Iowa is required.

What Happens if an Iowa Company Does Not Obtain Worker’s Compensation Insurance?

Any employer who fails to purchase worker’s compensation insurance or to successfully petition to become self-certified risks a number of penalties, including:

  • The revocation of future insurance and self-insurance privileges;
  • Civil injunctions;
  • Fines of up to $1,000 payable to Iowa Second Injury Fund;
  • Being fully liable for an employee’s work-related damages; and
  • Further fines and penalties for individual occurrences of failure to provide or pay worker’s compensation orders.

Penalties and fines are worse for officers of the company and can run up into the thousands of dollars each day depending on the size of the company and the work done by the employees. An individual who willfully or knowingly violates Iowa worker’s compensation law is guilty of a class “D” felony.

If the company willfully chooses not to provide worker’s compensation it must provide a written notice that is posted throughout the workspace and present in new hire paperwork. Any employee working for this company would “agree” to the fact that they will likely be unable to get any worker’s compensation from the company in the event of an injury. This provides the company with at least some legal protection from liability, but it is still not advisable for most companies, especially those operating in more hazardous industries.

How Can an Iowa Company Obtain Worker’s Compensation Insurance?

Iowa companies can elect to purchase work comp plans through private insurance companies or apply for self-insurance. Most companies will opt to purchase contracts through private insurance companies and there are many resources available to help new and existing companies find the best work comp plan for the business and its employees. If you have any questions about worker’s compensation in Iowa please give us a call at 630-324-6666.

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