Must Minnesota Providers Purchase Workers’ Compensation Insurance?

6a0133f3fc5805970b01a3fb70e488970b-320wiFamily child care licensing rules are very different from state to state. Because many of my readers are from my home state of Minnesota, I’ve posted this article about workers’ compensation.

The short answer in Minnesota is: Only if you have an employee who is not a family member.

There is some confusion surrounding this question because of new language in the Minnesota Department of Human Services (DHS) family child care Licensing Application.

In Section 10 of the Licensing Application (“Workers compensation insurance verification”) it says that DHS is “prohibited form issuing a license until the applicant presents acceptable evidence of compliance with the workers’ compensation insurance requirement of Minnesota Statutes, Chapter 176.” In the same Section it requires providers to “complete and submit the Certificate of Compliance Minnesota Workers’ Compensation Law (MN LIC 04) form with your license application.”

Does this mean all family child care providers are required to purchase workers’ compensation insurance? No!

The language in the Licensing Application means that you must comply with the state workers’ compensation laws, not that you purchase the insurance. You must show your compliance by filling out the Certificate of Compliance form. This form says that you must either show proof that you have workers’ compensation insurance or that you are exempt from getting the insurance. The reason you can be exempt from purchasing insurance is if you do not have any employees.

So, if you don’t have employees you don’t need workers’ compensation insurance.

When do you have an employee?

It’s easier to say when you don’t have an employee under the Minnesota workers’ compensation law:
•    If you hire your spouse, your own children or your parent.
•    If you hire someone who is self-employed and in the business of providing substitute care for child care providers. This person must work for more than one provider, have a business name, register their name with the state, and use their own contract.
•    If you hire someone who only provides an activity for your daycare children (music lesson, dance lesson, swimming lesson, puppet show, etc.).
•    If you hire someone who provides a service for you, but doesn’t care for children: house cleaning, lawn mowing, gardening, house repairs, etc.
•    If someone helps you care for children as a volunteer. If you don’t pay the person, you don’t have an employee. If you buy clothing or other items for the volunteer in exchange for her work, this would be considered compensation and the person would then be considered an employee.

Everyone else that you pay to help you care for children is your employee and you must purchase workers’ compensation insurance to cover them.

This is true regardless of how little you pay the person or how few hours they work for you.

•    You hire a substitute to care for the children while you go to the dentist for 3 hours: employee.
•    You hire a high school student to help you care for children for eight weeks in the summer: employee.
•    You hire someone to help you care for children for two days a week: employee.
•    You hire someone to help you care for children full-time: employee.

Unfortunately, many providers make the mistake of thinking they aren’t required to get workers’ compensation insurance because they only use part-time helpers. Not true! The Minnesota workers’ compensation law has been around for many years.

Workers’ compensation insurance provides benefits to employees who are injured while working. If your worker gets injured while working for you, and you don’t have this insurance, you will be forced to pay the worker’s entire medical bill, plus a large fine. This can be a significant expense to you!

In addition, there are payroll taxes that you must pay when you hire an employee. These include: Social Security/Medicare tax as well as federal and state unemployment taxes. These payroll tax rules and the federal and state tax forms you must fill out are complicated. You may want to consult a tax professional for help.

I know that many providers are either unaware of these laws or choose to ignore them, thinking that they don’t apply to them. But they do!

Important Note: In this article I am describing how the workers’ compensation law works in Minnesota. The rules are different in other states. For example, in New York providers must purchase workers’ compensation insurance even if they hire their spouse or their own children, as well as for any volunteers who work for them!

I am happy to answer your questions about the workers’ compensation law and the consequences of hiring an employee. Here are additional articles on these topics.

Contact me at 651-280-5991;

Tom Copeland –

Image credit:

Categories: Employees, Record Keeping & Taxes

Tags: , , , , , , , ,

6 replies

  1. Do you have some places that offer workman’s comp. insurance for a cheap rate. I checked with my ins. $600.00, I will have a helper for 2 mo. not going to pay $600.00. This is ridiculous, all the new rules etc. going to run providers out of bussiness. We don’t make a lot of $$ and the parents are tapped as well.

  2. Talk to your business liability insurance agent to see if he/she can get you a cheaper rate. Or, contact your state workers compensation office for referrals to other companies.

  3. I work for a provider part-time. Would my becoming a “business” as a sole proprietor mean she wouldn’t have to worry about paying the workers compensation insurance or eventually payroll taxes? If I was a “business” can I work for her alone or do I need to work with more providers?

  4. for the worker’s comp insurance who is considered a family member????
    husband, wife, child, daughter-in-law, son-in-law, significant other, brother, sister, sister-in-law, brother-in-law, aunt,uncle

  5. I do actually have an employee and do not have workers compensation insurance, so I need to get some! I am in MN, so I find this very helpful, and I did find out through the relicensing paperwork. However, I don’t know where to start! The MN website is less than helpful, so I contacted several insurance companies that cater to small businesses. None will insure me because my business is located in my home. Most are telling me it isn’t required, which I know isn’t true. What do I do? Are you suggesting that my childcare liability insurance company may handle this? I’m frustrated! I employ a second person because I feel it gives better care to the children and better reliability to the parents, but between taxes and insurance, it’s approaching most of my income! I wish this wasn’t so, because I truly think my business is better because there are 2 adults present, but it is virtually impossible to hire an employee. Sigh…not your fault…if you have suggestions on where to look in order to comply, that would be fabulous!

  6. Ask your liability insurance agent if they will sell your a workers comp policy. If not, call the state at 800-342-5354 and press 3. They should be able to identify companies that will sell you the insurance. Another option, contact other business liability insurance agents on my blog and ask if they can sell you a workers comp policy.

Leave a Reply

Your email address will not be published. Required fields are marked *