Last Updated on September 4, 2025 by The Insurance Pros

Do I need workers’ compensation insurance as a business owner in Michigan?

Michigan business owner reviewing a workers’ compensation form at a desk with payroll documents and a Michigan sign.If you’re launching a business, managing a small team, or running a side hustle in Michigan, you might be wondering, “Am I legally required to carry workers’ compensation insurance?” The answer depends on your business structure, number of employees, and even how long someone works for you.

Let’s break it down so you can stay compliant and avoid costly penalties.

✅ Michigan Workers’ Compensation Requirements

You must carry workers’ comp if:

  • You have 3 or more employees at any time (even part-time or seasonal)
  • You employ 1 worker full-time (35+ hours/week) for 13 weeks or more in the past year

Even contractors or casual hires may count depending on the work performed and how they’re paid.

❌ When You May Be Exempt

You may not need coverage if:

  • You are a sole proprietor with no employees
  • All workers are co-owners, partners, or corporate officers
  • You’re a family-run business (certain exclusions apply)
  • You use only 1099 contractors (but misclassification is a red flag)

To make your exemption official, file Form WC-337 with the Michigan Workers’ Disability Compensation Agency.

⚠️ Penalties and Audit Risks

Skipping workers’ comp when you’re required to have it could result in:

  • Civil lawsuits if an employee is injured
  • Fines up to $1,000/day for each uninsured day
  • Jail time (yes, up to 6 months)
  • State orders to cease business operations

Michigan can audit your payroll at any time. Even honest mistakes or assumptions about who “counts” as an employee could cost thousands.

📌 What to Do If You’re Denied Coverage

If you’ve tried to buy workers’ comp but were turned down by private insurers, don’t panic. You may qualify for state assistance. Read this next:

👉 Denied Michigan Workers’ Compensation? Here’s What to Do

🧾 Final Thought

Navigating Michigan’s workers’ comp rules can be confusing, but noncompliance can cost you your business. Whether you’re a solo LLC or hiring your first employee, it’s worth double-checking your obligations.

🛡️ Talk to a Michigan Agent About Workers’ Comp Requirements