Kansas Workers Comp

Do Kansas Contractors Need Workers Comp? The $20,000 Payroll Rule Explained

Short answer. Yes, once your business has employees and a total gross annual payroll of more than $20,000. Under K.S.A. 44-505, the Kansas Workers Compensation Act does not apply to an employer whose payroll was not more than $20,000 last calendar year and is reasonably estimated to stay at or under $20,000 this year. A general contractor can still require a workers comp certificate from you, because K.S.A. 44-503 can make it responsible for compensation owed to a subcontractor's employees. Call (913) 689-5474 or request a quote.

The $20,000 rule in K.S.A. 44-505

The Kansas Department of Labor puts it this way: an employer in a non-agricultural business “with more than $20,000 in gross annual payroll in a calendar year” must secure workers compensation coverage for its employees. K.S.A. 44-505(a)(2) and (a)(3) set out the tests.

If you had payroll last calendar year, both years count.

K.S.A. 44-505(a)(2) excludes an employer that “had a total gross annual payroll for the preceding calendar year of not more than $20,000 for all employees” and “reasonably estimates” it will not have more than $20,000 for the current calendar year. Both halves have to be true. If you paid more than $20,000 last year, this exclusion does not apply this year.

If you have not had a payroll for a calendar year, your estimate counts.

K.S.A. 44-505(a)(3) separately excludes an employer that “has not had a payroll for a calendar year” and reasonably estimates that its total gross annual payroll for the current calendar year will not be more than $20,000. You do not need a completed prior year to use it.

How payroll is counted

K.A.R. 51-11-6 says “all payroll paid by that employer to all workers shall be included,” and that the computation includes payroll “whether or not that payroll is paid to employees in the state of Kansas or outside the state of Kansas.” Wages your business pays its employees for a Missouri job can count toward this payroll test.

K.S.A. 44-505 leaves out wages paid to an employee “who is a member of the employer's family by marriage or consanguinity.” The Department of Labor's employer guide (K-WC 25) says that for a sole proprietor or partnership, “the wages paid to the owners and any of their family members are not used in the computation.” K.A.R. 51-11-6 adds that the family exclusion “shall not apply to corporate employers.”

If your business is an LLC, ask the Kansas Department of Labor how the payroll test applies to your compensation structure before relying on the exemption.

Owners: sole proprietors, partners, LLC members and 10% stockholders

K.S.A. 44-508(b) says that unless an election has been filed, the term employee “shall not include individual employers, limited liability company members, partners or self-employed persons.” If the business consists only of sole proprietors, partners or LLC members with no other employees and no coverage election, Kansas's employee definition generally does not require coverage for those owners. A contract, licensing program or another state's law may still create a separate requirement.

Under K.S.A. 44-543(b), any employee of a corporate employer “who owns 10% or more of the outstanding stock” may file a written declaration with the director, before any injury, electing not to accept the Act. Kansas DOL's OSCAR system supports workers compensation coverage elections.

Owners can also opt in. Under K.S.A. 44-542a, the policy “shall clearly indicate the intention of the parties to provide coverage” for the owner, and a statement of election is filed with the director.

Why your GC asks for a certificate anyway

A principal contractor can be responsible for workers compensation owed to a subcontractor's employees. The statute ties that responsibility to the contracted work and premises or work under the principal's control, and it provides relief where the subcontractor has secured the required compensation. For that subsection, K.S.A. 44-503(a) says a worker “shall not include an individual who is a self-employed subcontractor.”

Under K.S.A. 44-503(g), the relief applies when the subcontractor's coverage is shown “by a current certificate of workers compensation insurance” or one of the other listed certifications. The Department of Labor's fact sheet K-WC 126 notes that “general contractors and others require certificates of insurance from all persons doing work for them.” If your GC needs one, request a certificate here.

The affidavit of exempt status, and when a minimum-premium policy fits

Under K.S.A. 44-5,127, “any person who is not required to be covered” may sign an affidavit of exempt status on a Kansas Insurance Department form. It creates “a rebuttable presumption that the executor is not an employee,” and it “shall not affect the rights or coverage of any employee of the individual executing the affidavit.” Because the presumption can be rebutted, the affidavit is not blanket protection from subcontractor claims. The current form is notarized and states it is good for that contractor's job or similar jobs “for one year from the date of notary.”

Roofers have a separate step. K.S.A. 50-6,125 requires workers comp coverage “or an affidavit of exemption or self-insurance” to register, and the Attorney General publishes its own affidavit that must be filed with its office. See Kansas roofing registration insurance.

Some contractors use the informal term ghost policy for a minimum-premium workers comp policy written for a business with no employees, usually to produce a certificate a GC requires. Confirm what the policy covers, any owner exclusions and its audit terms before buying. Under K.S.A. 44-542a, coverage for an owner requires a policy that clearly indicates that intent and a filed election.

Penalties for not carrying required coverage

If your payroll puts you under the Act and you have not secured coverage, Kansas law provides:

  • Misdemeanor and civil penalty. Knowingly and intentionally failing to secure required workers compensation can result in a class A misdemeanor and a civil penalty of twice the annual premium or $25,000, whichever is greater (K.S.A. 44-532(c) and (d)).
  • Order to insure or stop work. Under K.S.A. 74-711, the director orders an employer under the Act that has not filed a statement of insurance or qualified as a self-insurer or pool member to do so “or to cease doing business in the state of Kansas” within at least 10 days, and can seek a court injunction if it does not comply.
  • The claim itself. Under K.S.A. 44-532a, an uninsured employer's injured worker can apply to be paid from the state Workers Compensation Fund, and the state can sue the employer to recover it.

Working across the state line

Missouri uses a different test. RSMo 287.030 covers construction industry employers “if they have one or more employees.” See Missouri workers comp requirements for construction. Local licenses have their own insurance rules: see Johnson County and Kansas City, Missouri.

How TradeGuard handles Kansas workers comp for contractors

  1. 1You tell us your entity type, working owners, employees and payroll, and send the insurance section of your subcontract. We go through it before we quote.
  2. 2We check that the insurer is authorized to write workers compensation in Kansas, then quote the policy.
  3. 3If you have no employees but a GC requires a certificate, we can quote a minimum-premium policy.
  4. 4If your contract requires a workers compensation waiver of subrogation, we ask the insurer for the endorsement.
  5. 5Once the policy is bound, we issue the certificate the same day in most cases, often within minutes for policies written through TradeGuard.
  6. 6We track your policy renewal and send updated certificates at renewal. For a new GC, request a certificate.

TradeGuard Insurance is a licensed insurance agency (NPN 22154473) based in Leawood, Kansas. We can quote and place policies in all 50 states, and we write workers comp, including minimum-premium policies, in Kansas and Missouri.

Get your Kansas workers comp policy and your GC's certificate.

Call (913) 689-5474 or request a quote.

Request a Quote Call (913) 689-5474

Frequently asked questions

Payroll. Under K.S.A. 44-505(a)(2), the Act does not apply to an employer whose gross annual payroll was not more than $20,000 last calendar year and is reasonably estimated to be not more than $20,000 this year. Under 44-505(a)(3), an employer that has not had a payroll for a calendar year uses its estimate for the current year. Missouri is different: construction employers there are covered with one or more employees.

If the business consists only of sole proprietors, partners or LLC members with no other employees and no coverage election, Kansas's employee definition in K.S.A. 44-508(b) generally does not require coverage for those owners. A contract, licensing program or another state's law may still create a separate requirement, and a general contractor may require a certificate under its subcontract.

For a sole proprietor or partnership, the Kansas Department of Labor's employer guide says wages paid to the owners and their family members are not used in the computation. If your business is an LLC, ask the Kansas Department of Labor how the payroll test applies to your compensation structure before relying on the exemption.

Yes. Under K.S.A. 44-503, a principal contractor can be responsible for workers compensation owed to a subcontractor's employees. The statute ties that responsibility to the contracted work and premises or work under the principal's control, and it provides relief where the subcontractor has secured the required compensation, as shown by a current certificate of workers compensation insurance. That is why GCs ask for one.

Knowingly and intentionally failing to secure required workers compensation can result in a class A misdemeanor and a civil penalty of twice the annual premium or $25,000, whichever is greater, under K.S.A. 44-532. Under K.S.A. 74-711 the director can also order an uninsured employer to get coverage or stop doing business in Kansas.

A notarized Kansas Insurance Department form under K.S.A. 44-5,127 that a person not required to be covered can sign. It creates a rebuttable presumption that the signer is not an employee, it does not affect the rights or coverage of the signer's own employees, and it is not blanket protection from subcontractor claims. Knowingly giving false information is a misdemeanor with a fine of up to $1,000. Roofers registering with the Attorney General file the AG's own exemption affidavit.