Does Arizona require workers’ compensation insurance?
Yes. Arizona requires workers' compensation from the first employee: under A.R.S. 23-902, every business that employs any workers regularly employed in its business, including part-year workers, must secure coverage, with an exception for domestic servants. Sole proprietors, partners, and working owners of 50% or more of an LLC or corporation are not employees unless their carrier endorses them in, but minority owners who work in the business count as employees.
Updated . Written by Andre Beukers, principal at Redoubt, a commercial insurance agency in Salt Lake City, not a government office.
How many employees before Arizona requires workers' comp?
There is no head-count floor. A.R.S. 23-902 makes every person who employs any workers regularly employed in the same business under a contract of hire an employer, and "regularly employed" includes seasonal and part-year work in the usual trade of the business. Employers of domestic servants are the one listed exception and may opt in. When a business supervises or controls a contractor doing work that is part of its own trade, that contractor and its workers count as the business's employees under 23-902(B).
Source: A.R.S. 23-902, checked .
Which owners, officers, and family members are exempt in Arizona?
Arizona draws the line by ownership, under A.R.S. 23-901(6). A sole proprietor or working partner is not an employee unless the carrier accepts an application to cover them by endorsement. An LLC member or corporate shareholder who works in the business and owns 50% or more is outside coverage unless endorsed in the same way; one who owns less than 50% is an employee and must be covered. The definition has no separate exception for relatives, so a family member on payroll counts like any other worker.
Source: A.R.S. 23-901, checked .
What happens to a Arizona employer with no workers' comp?
Under A.R.S. 23-907 the Industrial Commission can assess a civil penalty of up to $1,000 on an uninsured employer, up to $5,000 for a second failure within five years, and up to $10,000 for a third. It can ask a court to shut the business down until coverage is in place. An injured worker can sue the employer without the defenses of assumption of risk or contributory negligence, or claim from the Commission's Special Fund, which bills the employer for what it pays plus a penalty of 10% or $1,000, whichever is greater.
Source: A.R.S. 23-907, checked .
Who enforces workers' comp in Arizona?
The Industrial Commission of Arizona administers the workers' compensation chapter and adjudicates claims under A.R.S. 23-921. It issues the uninsured-employer penalties above, runs the Special Fund that pays injured workers of uninsured employers, and approves self-insurers. The Department of Insurance and Financial Institutions licenses the carriers and the rating organization, not the employers.
Source: A.R.S. 23-921, checked .
Where do Arizona employers buy coverage?
Arizona is a private-market state. Under A.R.S. 23-961 an employer either insures with a carrier authorized by the Department of Insurance and Financial Institutions or qualifies with the Industrial Commission to self-insure, alone or through an approved pool. An employer turned down by two or more insurers goes to the single Arizona assigned risk plan under A.R.S. 23-1091, where rates by default follow the rating organization's filing plus a uniform surcharge.
Arizona has no state fund today. The Arizona Senate's issue brief on the State Compensation Fund records that it wrote coverage from 1925 to 2013, when the Legislature had it replaced by a successor mutual insurer.
Source: A.R.S. 23-1091, checked .
Who sets the class codes and rates in Arizona?
Arizona is an NCCI state. Under A.R.S. 20-357 a workers' compensation insurer meets its rate-filing duty by joining a licensed rating organization, which files rates each year to take effect January 1, and NCCI publishes Arizona's state advisory report on that filing. Class codes and experience mods come from NCCI; under A.R.S. 20-359 each carrier may file up to six uniform percentage deviations up or down from those rates.
Source: NCCI, State Advisory Resources: Arizona, checked .
Is there an exemption or waiver form in Arizona?
The filings Arizona law sets up are signed between the parties rather than issued by the state. A sole proprietor doing work for an insured business can waive coverage under A.R.S. 23-961(N) on a waiver that both the sole proprietor and the hiring business's insurance carrier sign and date; the hiring business then owes no premium for that person. The Industrial Commission posts a sole proprietor statement form for this waiver; check with the Commission for its current version.
For 1099 workers who are not sole proprietors signing a waiver, A.R.S. 23-902(D) lets a business and an independent contractor sign a dated written agreement, with the listed terms and a disclosure that the contractor is not entitled to workers' comp from the business. It creates a rebuttable presumption of independent-contractor status, and once a completed agreement is submitted to the carrier, the carrier cannot charge premium on those payments unless the presumption is overcome.
Arizona also lets an employee reject the compensation law in writing before any injury (A.R.S. 23-906). That is the employee's choice, not an employer exemption, and every employer must post the notice of that right in English and Spanish.
Source: A.R.S. 23-961, checked .
Sorting out Arizona workers' comp for your business
Tell Redoubt what the business does, who works in it, and what the Arizona requirement in front of you says. We will say whether a policy, a waiver, or an exclusion fits.
This is general insurance information, not legal advice or a coverage determination. Statutes, agency instructions, policy forms, and the facts of the business control.
Workers’ comp requirements in every state
Each state page gives the employee threshold, the owner and officer exemptions, the penalty for going without, the rating bureau, the market, the enforcing agency, and the exemption filing, each with its statute or agency source.
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The hub, and the Arizona pages that go deeper
Arizona workers’ comp FAQ
Do I need workers' comp in Arizona with only one employee?+
Yes. A.R.S. 23-902 covers every business that regularly employs any workers, and part-year or seasonal work in the usual trade of the business counts. The only listed exception is for employers of domestic servants.
Does an Arizona LLC owner have to be covered?+
It depends on ownership. Under A.R.S. 23-901, a working member who owns less than 50% of the LLC is an employee and must be covered. A member who owns 50% or more is covered only if the carrier accepts an application to endorse them onto the policy.
Can a sole proprietor subcontractor in Arizona skip workers' comp?+
A sole proprietor with no employees is not required to cover themselves. To keep the hiring business from owing premium on them, A.R.S. 23-961(N) provides a waiver signed by the sole proprietor and the hiring business's carrier. Once the sole proprietor hires anyone, those workers need coverage.
What does Arizona charge an employer caught without coverage?+
The Industrial Commission can assess up to $1,000, then up to $5,000 and $10,000 for repeat failures within five years, under A.R.S. 23-907. If a worker is hurt, the employer also repays the Special Fund's claim costs plus a penalty and can be sued directly.