Although it is mandatory for most companies to provide Workers’ Compensation to their employees, some company executives have the choice of opting out of this coverage. Although it can be complicated, there are pros and cons to declining.
The most obvious reason to opt out would be to save the company money in premiums and other adjusted rates. Some executives may have separate health, disability, or accident policies that provide benefits aside from Workers’ Compensation. These could cover work-related injuries at a lower cost.
In addition, if the executive’s spouse has health insurance, they may have additional coverage under that policy.
How an Executive Officer Can Decline Coverage
According to the Workers’ Compensation Insurance Rating Bureau (WCIRB), executive officers are usually classified as:
- Vice presidents
- Secretaries and assistant secretaries
- Treasurers and assistant treasurers
- Other executives as defined by the corporation’s charter
They must be appointed or elected, and then empowered by the company’s directors.
If the executive officer wishes to decline the Workers’ Compensation insurance, the company stock must be 100 hundred percent owned by its directors and executive officers. As of 2017, though, the executive officer now must own at least 15 percent of the stock.
Once the executive has made the decision, they must prepare a written waiver of their rights confirming that they are an executive officer, and that they do not want the Workers’ Compensation coverage.
Active vs. Inactive Officers
Some executive officers may be classified differently, depending on whether they are actively involved with the company. Determining the status of these officers will determine whether they can qualify for Workers’ Compensation or its exclusion.
If the individual is not actually performing services and getting paid for them, or only comes to the office to attend meetings, they may be considered inactive. Some states require a minimum payroll charge, and if it is not met, the officer will not be able to obtain benefits.
Workers’ Compensation Benefits vs. Other Policies
Workers’ Compensation policies may offer more benefits than other health insurance plans. This could include partial and permanent disability coverage, some of which pay higher rates and are payable for life. Unlimited health insurance without a deductible is another benefit; burial benefits of $10,000.00 and death benefits up to $320,000.00 are also important to consider.
In most cases, it is recommended that executive officers participate in their company’s Workers’ Compensation policies. The cost of coverage is generally not high, and if they want to decline, they must have appropriate health coverage in case of work-related injuries.
Exclusion and Inclusion in Delaware
In Delaware, corporate officers and LLC members are automatically included in the Delaware Workers’ Compensation coverage, but they may choose to be excluded. Both can exclude up to eight officers, but only if there are stockholders.
Construction companies may exclude four officers. Conversely, sole proprietors and partners are excluded from the coverage, but can elect for inclusion. Forms for both can be obtained at the Delaware website, or through the insurance company.
Wilmington Workers’ Compensation Lawyers at McCann Dillon Jaffe & Lamb, LLC Provide Legal Representation to Company Executives
If you have been injured at work, you need the services of an experienced Wilmington workplace injury lawyer at McCann Dillon Jaffe & Lamb, LLC. Call our office today at 302-888-1221 or use our convenient online form to contact us for a free case evaluation. We represent clients throughout Delaware, New Jersey and Pennsylvania.