If you’re an employer, you are responsible for handling payroll taxes for your employees. And on top of your payroll responsibilities, you might also need to get workers’ compensation coverage. Washington state employers needing to get workers’ compensation must learn about Washington Labor and Industries regulations, exemptions, and rates.
Read on to learn all about Washington’s version of workers’ compensation insurance.
Washington Labor and Industries
Washington Labor and Industries (L&I) is Washington state’s workers’ compensation insurance. Washington L&I insurance is also referred to as Washington Industrial Insurance. Employers can purchase workers’ compensation coverage through the Washington State Department of Labor and Industries.
If you’re not familiar with workers’ compensation, here’s a brief refresher. Workers’ compensation, or workers’ comp, is an insurance that provides medical benefits and wage replacement to eligible employees. Employees with job-related injuries or illnesses can receive workers’ comp benefits.
Workers’ comp covers employees regardless of whose fault it is (e.g., employee, employer, co-worker). However, employees cannot receive benefits if the illness or injury is not related to the job.
Workers’ compensation provides benefits to employees such as payment for treatment, diagnosis, medical care, or job retraining.
Washington requires that employees must be covered by state Industrial Insurance (if applicable). Employers can purchase L&I tax coverage through the Department of Labor and Industries.
Self-insured businesses and L&I
Employers with at least $25 million in assets and an effective accident prevention program may be allowed to offer self-insurance workers’ compensation coverage.
Self-insured employers assume all of the risks and costs of workers’ compensation coverage. They also manage all aspects of workers’ comp claims.
To find out if your business qualifies for self-insurance coverage, review the Washington Administrative Code.
Independent contractors and L&I
Are you required to get L&I coverage for contractors? Generally, you are not required to provide coverage for independent contractors. However, your responsibilities depend on what your business’s contract states.
If the contract is for the same services or products your business normally provides, you might need to purchase coverage.
Say your construction business hires an independent contractor to work for your business. The contractor is licensed to provide construction services. Because they are licensed in the same industry as your business, you would need to get coverage for the contractor.
Contact Washington to find out whether you need to get coverage for an independent contractor.
Some employers are not required to have workers’ compensation insurance. If you are not required to have Washington L&I, you can choose to purchase elective coverage.
You can opt to elect coverage if you meet exemption requirements and are considered one of the following:
- Sole proprietor
- Partner in a partnership
- Member of a limited liability company (LLC)
- Corporate officer
Most employees in Washington state are covered by Industrial Insurance. But, some employees may fall into categories that aren’t automatically covered by workers’ comp.
Employers are not required to provide L&I coverage for the following workers:
- Domestic worker in a private home (e.g., nanny)
- An individual employed to do gardening, maintenance, or repair at an employer’s private home
- Worker who is not a regular employee of the trade, business, or profession of the employer and is not working at the employer’s private home
- A person only working in return for aid from a religious or charitable organization
- Child under the age of 18 working for a parent doing agricultural activities on a family farm
- Horse-racing jockey
- An employee whose work is covered through the Federal Employees’ Compensation Act, Longshoremen’s and Harbor Workers’ Compensation Act, Jones Act, or Law Enforcement Officers and Fire Fighters Compensation Plan
- Certain musicians or entertainers
- Newspaper carriers or vendors
- Insurance producer
- Cosmetologist, beautician, or barber
- A driver providing commercial transportation
- For-hire vehicle operators, chauffeurs, and taxicab drivers who own or lease the for-hire vehicle
You can view more information about which employees are exempt from L&I on Washington’s website.
Washington state L&I rates
The Department of Labor and Industries determines the Washington L&I tax rates. Rates can vary based on a few factors such as:
- Type of business (e.g., manufacturing)
- Accident and illness rates in your industry
- Your business’s claim history
- The job’s risk classification
A huge factor that determines L&I rates is how risky the job is for your employees. For example, rates in the construction industry are higher than rates for retail workers. The more likely it is for an employee to get hurt or sick on the job, the higher the rate.
To find out your L&I rate, contact Washington State’s Department of Labor and Industries. You can also view Washington’s workers’ comp rates broken down by business type and classification code online.
New employers in Washington state
New employers in Washington state must register for L&I insurance with the state. After you register, the Department of Labor and Industries will typically assign you your L&I rate within two weeks.
Ways to minimize L&I costs
For some industries, workers’ compensation coverage can get pretty pricey. Luckily, there are things you can do to help minimize the cost of workers’ comp and avoid higher L&I rates.
Some precautions you can take at your business to reduce L&I rates and costs include:
- Maintaining a safe and injury-free workplace
- Creating a safety program
- Having regular employee safety training (e.g., monthly training workshops)
- Clearly displaying written workplace safety and health rules
- Offering incentive programs that promote and reinforce workplace safety
- Monitoring workers’ comp claims to ensure the system isn’t abused (e.g., workers’ compensation fraud)
Need an easy way to track your Washington Industrial Insurance? Patriot’s payroll software calculates your payroll taxes and deductions for you. Say goodbye to manual calculations and tax tables and hello to more time for your business. Get started with your self-guided demo today!
This article is updated from its original publication date of July 22, 2019.This is not intended as legal advice; for more information, please click here.