Providing Florida workers’ compensation coverage for clients in the construction industry can be one of the most challenging aspects of an insurance agency.  Contractors are subject to a lot more regulation from the state than other types of businesses.  They also have servicing needs that other accounts don’t, such as issuing Certificates of Insurance on a regular basis.  If your agency serves construction clients, here are the top 10 things you should know about writing workers’ comp for contractors.

1. What kinds of businesses are classified as “construction?”

The Florida Division of Workers’ Compensation publishes a list of the NCCI class codes that the state considers to be in the construction industry.  It’s important to review the list because some industries are considered to be “construction” that aren’t commonly thought of as construction, like landscaping operations.  You can find the complete list in the Division’s rule 69L-6.021, available on their website at

2. In the construction industry, who has to be covered by workers’ comp insurance?

Every person working on a construction site must either be covered by a workers’ comp policy or have a valid exemption from workers’ comp.  Construction industry businesses must have workers’ comp to cover all employees.  Corporate officers and limited liability company (LLC) owners are considered “employees” unless they have been issued an exemption by the state Division of Workers’ Compensation.  Sole proprietors and partners of construction businesses are also “employees” for workers’ comp purposes because they cannot exempt out of coverage.

3. If a contractor uses subcontractors, who is responsible for the workers’ comp?

Under Florida law, contractors are responsible for making sure all their subs either have their own workers’ comp policy or have a valid exemption from workers’ comp.  If they hire a sub without either a policy or an exemption, the contractor will be liable for the sub’s workers’ comp.  Tell your clients to get a Certificate of Insurance or exemption card from everyone they hire or who comes onto the job site.  And they can’t just stop there. Tell them to check the state coverage database to make sure the policy or exemption is current and valid.  If they discover one of their subs is out of compliance with workers’ comp requirements, they should insist that the sub correct the problem before they can come back to the job site.  Also, your construction clients should register all of their subcontractors on the state’s Policy Tracking Database so they will be notified if one of their subs has their insurance cancelled or their exemption(s) expires.  Both databases are available at

4. Who can exempt out of workers’ comp?

In the construction codes, only the business owners with at least a 10% ownership of the company are eligible to exempt out of workers’ comp, and only 3 owners from one construction company can be exempt at any one time.  Non-owner employees are not eligible for exemptions.

5. How long are exemptions valid?

In the construction industry, exemptions must be renewed every 2 years.  The state Division of Workers’ Compensation notifies all exemption holders when their exemptions are about to expire, but your clients should not wait until they receive their renewal notice from the state.  Allowing an exemption to lapse can mean a visit from a state compliance officer and paying premium on the officer’s salary he or she received while the exemption was expired.

6. Is it legal for a construction company to have exempt officers only with no workers’ comp coverage in place?

If a company has 3 or fewer owners who all hold exemptions and there are no other employees, that company is complying with all workers’ comp requirements.  However, the minute that company hires a new employee, uses a day laborer, or brings anyone else to a jobsite, they are breaking the law.

7. Why is it important for my clients to file their Annual Report with the State of Florida?

Corporations and LLC’s must file an Annual Report with the State of Florida by May 1st of every year.  Companies that do not file their Annual Report are administratively dissolved by the state, and their owners can have their workers’ comp exemptions taken away.

8. If my client uses a one-person subcontractor that has an exemption, does that affect their ability to have Class Code 5606 (Executive Supervisor) on their workers’ comp policy?

Using one-person exempt subs can disqualify your client from being eligible for Class Code 5606 (Executive Supervisor).  The rate for 5606 is much lower than most construction class codes, so some contractors ask to have their supervisors classified under 5606.  But this code can be tricky to qualify for because (1) it can only be used for employees who don’t go to the job site (i.e., who don’t “swing a hammer” and (2) hiring a subcontractor with an exemption disqualifies a contractor from this code.  Code 5606 is for employees who are supervising the supervisors on the job site.  The crucial test is that middle layer of supervision between the job site employee and the supervisor.  When a contractor uses a one-person sub that is exempt, the subcontractor cannot provide that crucial middle layer of supervision, disqualifying the contractor from using the Executive Supervisor code and getting that lower rate.

9. What are the requirements for out-of-state construction businesses doing work in Florida?

An out-of-state construction business doing work in Florida must obtain either a stand-alone Florida workers’ comp policy or a Florida endorsement to their out-of-state policy to cover their operations in Florida.

10. Should my construction clients be concerned if one of their subcontractors gets their workers’ comp from a PEO?

It is more and more common in the industry for subcontractors to lease their employees from a Professional Employer Organization (PEO).  In this arrangement, the subcontractor signs a contract with an employee leasing company where the PEO is actually the employer and provides workers’ comp coverage for the leased employees.  The subcontractor does not have any employees (at least it’s not supposed to) and has no insurance policy in place.  But here’s the loophole:  PEO’s only provide workers’ comp insurance to employees they have been given advance written notice of and which they have accepted as their employee.  If your client uses a sub whose coverage is with a PEO and the sub hires anyone, that worker is not covered by the PEO’s workers’ comp policy unless and until the PEO agrees to cover that worker.  Which means if your client hires a subcontractor that uses a PEO, if that sub hires someone without getting clearance and acceptance from the PEO, that employee now is the responsibility of your client, both in terms of paying premium and in terms of any claims that may occur.

The author

Karen Phillips has been the General Counsel for Florida United Businesses Association (FUBA) since 1991.  FUBA is a statewide business trade association representing small businesses throughout Florida.  Ms. Phillips provides advice to small businesses on a broad range of state regulatory issues, sales taxes, and employment law.  Ms. Phillips also serves as General Counsel to FUBA Workers’ Comp, the sponsored workers’ compensation insurance services provider for eligible FUBA members. 

[‘Top 10 Things to Know about Writing Workers’ Comp for Contractors in Florida’ was originally published in Rough Notes Magazine, June 2019.]