Not Understanding Your State’s Workers’ Compensation Laws | WIMC

March 3, 2025

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Not Understanding Your State’s Workers’ Compensation Laws

Each state in the U.S. has different laws regarding workers’ compensation. Some states require businesses to have workers' comp insurance, while others have specific guidelines for certain industries. Cleaning service owners must understand their state’s regulations to ensure they comply with the law. Not doing so could result in fines or other legal consequences.

State-specific regulations: States like California have more strict regulations, while others may not require it for small businesses or for certain types of employees.
Penalties for non-compliance: If you operate in a state where workers’ comp is mandatory, failure to provide insurance could lead to hefty fines, business closure, or personal liability.
Independent contractors: Some cleaning service businesses hire independent contractors rather than employees, and the law may treat them differently. Be sure to check if your contractors need to be covered under your workers' comp policy.

How to Avoid This Mistake:

Research your state’s workers’ comp requirements thoroughly.
Consult a local insurance expert who can help you navigate state-specific laws.
Regularly check for updates in your state’s laws to stay compliant.

2. Underestimating the Risks Involved in the Cleaning Industry

Cleaning is considered a high-risk job, with employees often exposed to physical strain, hazardous chemicals, and various other health risks. Many cleaning service owners make the mistake of underestimating these risks, leading to insufficient coverage. For example, cleaning staff may be injured while using heavy cleaning equipment, slipping on wet floors, or experiencing allergic reactions to cleaning products.

Common hazards in cleaning services: These include slips, trips, and falls, exposure to harmful chemicals, back injuries from lifting heavy objects, and cuts or abrasions from cleaning tools.
Long-term health issues: Over time, exposure to chemicals or repetitive movements can lead to chronic conditions that are difficult to treat.
Claims frequency: Cleaning service workers are more likely to file workers’ compensation claims compared to those in less physically demanding industries.

How to Avoid This Mistake:

Assess the specific risks your employees face on the job.
Ensure your workers' comp insurance covers the full range of injuries and illnesses related to cleaning services.
Implement safety protocols to minimize risks, such as using proper lifting techniques and protective gear.

3. Not Factoring in All Employees or Subcontractors

Many cleaning service owners make the mistake of only considering their full-time employees when purchasing workers' comp insurance. This oversight can lead to gaps in coverage for part-time employees or subcontractors who may not be included in the policy.

Full-time vs. part-time employees: Some owners assume part-time employees are not eligible for workers’ comp insurance, but this isn’t always the case.
Subcontractors and temporary workers: Subcontractors and temporary workers can sometimes be excluded from the coverage if the business fails to include them in the policy.
Liability for uninsured workers: If a worker who is not covered by insurance gets injured, the business could be liable for medical costs, lost wages, and other expenses.

How to Avoid This Mistake:

Ensure all workers, including part-time and subcontractors, are included in the policy.
Check the terms of your workers' comp insurance to see if it covers temporary or seasonal employees.
Be clear about your employee classifications when discussing insurance options.

4. Choosing the Cheapest Option Without Considering Coverage

When it comes to workers' compensation insurance, many cleaning service owners focus only on finding the lowest premium rather than considering the adequacy of the coverage. This could lead to a situation where the insurance doesn’t provide enough protection in the event of a serious accident or claim.

The risks of low-cost policies: A cheap workers' comp policy may have higher deductibles or limited coverage that might not fully protect you or your workers.
Inadequate medical benefits: If your insurance doesn’t provide comprehensive medical coverage for injuries, you could face significant out-of-pocket costs.
Not covering all types of injuries: Some policies may have exclusions for certain types of injuries, such as repetitive strain injuries or illnesses caused by exposure to harmful substances.

How to Avoid This Mistake:

Avoid solely focusing on price. Consider the coverage and the reputation of the insurance provider.
Assess the claims history and reviews of potential insurers.
Look for policies that cover a wide range of injuries and illnesses, especially those common in the cleaning industry.

5. Failing to Review and Update Your Workers’ Comp Policy Regularly

Another common mistake is neglecting to review and update your workers’ comp policy on a regular basis. Your business may change over time, such as hiring more employees, expanding to new locations, or offering new services. Failing to update your insurance policy to reflect these changes could result in gaps in coverage.

Growth and expansion: As your business grows, you may hire more employees or increase your operations. This can lead to a higher risk of injury and a need for additional coverage.
Changes in job duties: If your employees start performing different tasks or using new equipment, your policy may need to be updated to reflect the new risks.
Changes in laws: State regulations can change, and what was once adequate coverage may no longer be enough.

How to Avoid This Mistake:

Regularly review your workers' comp policy to ensure it still fits your business needs.
Notify your insurer of any significant changes, such as hiring more employees or changing job roles.
Set a reminder to review the policy annually or after major business changes.

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