Washington Workers’ Compensation Insurance: Laws, Rules & More

Workers’ compensation insurance is required in most states to pay employees’ medical bills and wage replacement after a workplace injury or illness. In Washington, workers’ compensation insurance is required for all employers with one or more employees. Washington is unique because it’s a monopolistic state, which means employers must purchase coverage through the state fund.

What Workers’ Compensation Insurance Is

Workers’ compensation insurance covers employees who experience a work-related injury or occupational illness during the course of their regular duties. Policies pay for medical expenses incurred from the workplace injury or illness while also covering a portion of the employee’s weekly wages as they recover. They can also cover funeral expenses and death benefits.

Workers’ comp varies by state, but most states require employees to give up their right to sue employers for damages except in extreme circumstances. If an employee files a civil suit, most workers’ compensation insurance typically includes employer’s liability coverage to pay for your legal defense and possible disability settlements.

Washington Workers’ Compensation Insurance Is Monopolistic

Washington state workers’ compensation insurance is monopolistic, meaning business owners can only buy coverage from the state-run fund. In Washington State, workers’ compensation is administered through the Washington State Department of Labor & Industries (L&I). L&I manages all claims and pays benefits out of an insurance pool called the Washington State Fund.

The Washington State Fund makes its income solely from premiums paid by you and your employees, receiving no money from general tax revenues. Each business in Washington state must have a business license and an account with L&I to purchase workers’ compensation coverage through the fund. L&I uses its own job classification system to determine coverage rates.

Washington State Workers’ Compensation Self Insurance

Washington business owners may opt to self-insure if they’re approved and certified by L&I. Employers can qualify for self-insurance by demonstrating they are financially stable and have effective safety and administrative programs. Self-insured employers assume all risks and costs of workers’ compensation coverage.

If an employer opts to self-insure, they must meet four criteria:

• Be in business for at least three years
• Prove they have at least $25 million in assets
• Develop an effective accident prevention program
• Establish an administrative organization

Self-insured businesses must also manage all aspects of workers’ comp claims, including authorizing benefits and paying all benefits out of company funds. Reporting and record keeping for self-insured employers vary from those of employers covered by L&I.

How to Get Washington State Workers’ Compensation

Generally, all employers in Washington with one or more employees—whether full- or part-time employees—must provide workers’ compensation insurance. To obtain workers’ compensation coverage through the Washington State Fund, employers must open an account by completing a business license application.

If you own an existing business and plan to hire employees, you need to re-file the Business License application and indicate you are hiring. From there, each business is assigned an L&I account manager. While sole proprietors, partners, corporate officers, and LLC members are excluded from mandatory coverage, with some exceptions, they may choose to be included in their workers’ comp policy.

All employers must provide Washington workers’ comp insurance unless their employees are:

• Domestic workers in private homes (but two or more employed regularly for over 40 hours/week must be covered)
• Private residential gardeners and maintenance/repair workers
• A minor employed by a parent in agricultural activities on the family farm
• Musicians and entertainers at specific events
• Federal employees

Washington employers also have the option to self-insure, if approved. The process to get certified as self-insured take three months, with approvals being granted quarterly. Businesses must submit the self-insurance certification questionnaire to get started and other required documentation. To apply for self-insurance, consult the Employers’ Guide to Self-Insurance in Washington State.

What Washington Workers’ Compensation Insurance Covers

In Washington state, workers’ comp provides no-fault insurance coverage for most workers to cover injured employees’ medical expenses and related services that are essential to their treatment and recovery. If temporarily unable to work, injured workers may also receive partial wage replacement payments.

Washington workers’ compensation insurance typically provides coverage for employees in the following areas of loss:

• Medical services: Pays expenses related to all approved healthcare services necessary for the treatment of an employee’s workplace injury or occupational disease
• Travel expenses: Covers partial payments for traveling more than 15 miles to see a healthcare provider, receive vocational training, or get fitted for a prosthetic device
• Wage replacement: Provides a percentage, typically 65 to 75%, an employee’s regular wages if they are unable to work due to their injury or illness; these benefits cannot exceed 120% of the state’s average wage
• Stay-at-work program: Helps incentivize employers to return their injured workers to medically approved light duty or transitional work
• Vocational rehabilitation: Assists with retraining employees that cannot return to their previous job or line-of-work
• Permanent partial disability awards: Provides financial support to employees whose work-related injuries or illnesses caused permanent loss of bodily function
• Pension awards: Pays for a monthly pension for life to an employee whose injury or illness results in permanent inability to work
• Survivor benefits: Provides the surviving spouse and legally dependent children a monthly benefit if a work-related injury or occupational illness results in an employee’s death; survivors also receive an immediate cash payment of 100% of the state’s average monthly wage, plus funeral expenses of up to 200% of the state’s average monthly wage
• Structured settlement agreements: Enables an injured employee, their employer, and L&I to resolve a workers’ comp claim; the agreement generally resolves all future benefits except medical.

Workers’ compensation insurance covers the financial liability of Washington employers for workplace injuries and illnesses, as well as legal representation if an employee files a lawsuit. Washington also has a second injury fund to protect businesses against certain financial risks if a previously disabled worker they hire suffers further injury.

Washington State Workers’ Compensation Insurance Costs

Washington workers’ compensation insurance costs are influenced by a variety of factors, including annual revenue, number of employees, and claims history. The average premium is $1.45 per $100 of payroll in Washington, according to the National Association of Social Insurance. In Washington state, both employers and employees contribute to workers’ compensation premiums.

Washington Risk Classification Codes

Washington uses business risk classification codes, approximately 300 in total, to set the base price of an employer’s workers’ compensation policy. Each code includes a value that corresponds to the level of risk that L&I estimates it is taking on by insuring a business. The premium rate is based on the risk classifications assigned to your business and your company’s experience factor.

Washington Workers’ Compensation Insurance Experience Rating

Your experience rating—a number that represents a business’s claims history—considers your workers’ hours and claims occurring during an “experience period,” or the oldest three of four fiscal years preceding the effective date of premium rates. L&I calculates your experience factor by comparing your workers’ comp claim costs to the expected costs for companies with similar reported hours and risk classifications.

A workers’ compensation claim affects your rate for three years. Employers can verify their current experience factor on the L&I website.

Calculating Your Workers’ Comp Premium Rate in Washington

After you open a workers’ comp account with L&I, you receive a Workers’ Compensation Rate Notice. This rate notice details the amount your business pays per worker-hour for each risk classification assigned to your business. The same base rates are used by all Washington employers in an assigned classification before modification by the experience factor.

All Washington workers’ compensation insurance premiums support four funds:

• Accident fund premium: Pays for wage replacement, permanent disability, and survivor benefits, as well as certain vocational rehabilitation for injured workers.
• Medical aid premium: Provides medical care and vocational rehabilitation services for injured workers.
• Stay-at-work premium: Provides partial reimbursement for wages, training, and other expenses to employers who provide light duty or transitional work for injured workers.
• Supplemental pension assessment: Provides cost-of-living increases to injured workers who receive extended wage replacement benefits—it is not experience rated.

The premium rates paid by a business, usually per hour worked, are determined by the following formula:

Experience Factor × (Class Accident Fund Base Rate + Class Medical Aid Fund Base Rate + Class Stay At Work Base Rate) + Supplemental Pension Fund Base Rate = Premium Rate

Employers can require their employees to pay a portion of the medical-aid, stay-at-work, and supplemental-pension premiums or they can opt to pay the premiums themselves. By state law, employees cannot be required to pay more than 50% of these premiums.

When a business pays its workers’ compensation premiums, the L&I collects them into the Washington State Fund—a pool used to pay compensation claims for employees who experience workplace injuries. The Washington State Fund only has income from the premiums, and all workers’ comp claims and settlements are paid for from this fund.

Washington Workers’ Compensation Insurance Cost Example

Your business operations, number of employees being covered, and past coverage and claims are all factors in how much your workers’ comp premium cost. For example, your business is assigned to the clerical office risk class (class code 4904-00), and your firm’s experience factor is 0.9789. In the most recent data available from 2014, this risk class had the following hourly class base rates:

• Accident Fund: $0.0301
• Medical Aid Fund: $0.0225
• Stay At Work: $0.0006
• Supplemental Pension Fund: $0.091

The 2014 premium rate for this firm is:

0.9789 × ($0.0301 + $0.0225 + 0.0006) + $0.091 = $0.1431 per hour worked

Clerical office work is generally considered a low-risk line of business, so rates are lower than something with more risk like commercial construction. However, even two businesses in the same risk class can have different rates because each individual business has a unique claims history and job classifications. Small businesses that prevent workplace injuries can also earn a discount on their premiums.

Washington Workers’ Comp Audit Requirements

In Washington, L&I may audit your business’s employment records. During an audit, an auditor inspects your business operations and records to verify that your workers’ payroll and hours have been reported accurately. The auditor also ensures that worker hours and claims associated with your business are appropriately classified. State law requires every employer to keep thorough quarterly records for at least three years on each employee for L&I to examine in case of an audit.

The documents required by L&I in an audit include:

• Employee name, address, and Social Security number
• Date hired (and terminated, if applicable)
• Job title and type of work performed
• Type of compensation
• Pay period
• Actual hours worked each day

Records for employees with multiple risk classifications must show:

• How many hours the employee worked in each class
• Gross pay
• Deductions from earnings
• Net pay
• Check numbers of checks issued

Additionally, employers must keep the following tax records for at least three years:

• Unemployment tax returns from the Employment Security Department
• State excise tax returns from the Department of Revenue
• IRS forms and tax returns. Other records and information that may need to

Businesses that self-insure must submit a quarterly report. An auditor will verify their total claim costs and worker hours reported to ensure the assessments paid to L&I are based on correct reporting. The auditor will also review the deduction for the asbestos and supplemental pension fund assessments, if taken from employees’ paychecks.

Washington State Workers’ Compensation Laws

Washington state law requires every employer to get workers’ compensation insurance from the state fund for nearly every employee to cover costs if they suffer a work-related illness or injury. This includes both part-time staff and full-time workers. Sole proprietors, partners, corporate officers, and limited liability company (LLC) members are excluded from mandatory coverage, but they can choose to be included in their policy.

Other businesses and employees that may be exempt from Washington state workers’ comp laws include:

• Some domestic workers (only one per home and doesn’t work more than 40 hours/week)
• Private residential gardeners and repair workers
• Minors who work as family farm laborers
• Musicians or entertainers at certain events
• Cosmetologists or hair care professionals (who rent or lease their space)

Washington Workers’ Compensation Insurance Deadlines

Washington state employers should obtain workers’ compensation insurance as soon as they open for business if they plan on hiring any staff. Without proper coverage for your first hire, your insurer may deny a claim citing a coverage gap, or you might face a penalty for failing to provide legally required benefits.

Here are some key workers’ compensation insurance deadlines for employers and employees in Washington to know:

• Employees have one year from their injury date to file a claim application with L&I or their self-insured employer
• Employees have two years from the date of their doctor’s diagnosis for occupational disease claims
• If an employee dies or experiences inpatient hospitalization, employers must report it to L&I within eight hours by calling 800-423-7233 or visiting their local L&I office
• If an employee experiences any non-hospitalized amputation or loss of eye, employers must report it to L&I within 24 hours by calling 800‑423‑7233 or visiting their local L&I office
• An injured employee’s physician has five days to send their report to L&I or the employees self-insured employer. If an employee is eligible for wage replacement benefits, and no further information is needed, L&I or their self-insured employer sends the first benefit check within 14 days of receiving the report.

Washington Workers’ Compensation Insurance Requirements

Additionally, Washington state workers’ comp laws and regulations that L&I enforces require all employers to post the following information:

• Certificate of insurance: Employers are required to obtain a certificate of insurance coverage and post it conspicuously in their place of business. If you have more than one business location, a separate certificate should be posted in each. The certificate is issued when your account is opened with L&I.
• Required posters: Notice to Employees—If a Job Injury Occurs (F242-191-909); Job Safety and Health Law (F416-081-909); and Your Rights as a Worker (F700-074-909) must be displayed where employees can see them to know their rights and responsibilities. Free copies can be obtained at your local L&I office or ordered online.

Washington Workers’ Compensation Insurance Penalties

Failure to file quarterly reports or pay premiums may result in penalties and fines. L&I will estimate premiums owed and collect them—the minimum penalty is $10. Even if there’s no hours or units to report, you must submit a report. A late report indicating “no hours/units” is assessed a $10 penalty.

Interest is assessed on all delinquent accounts at a rate of 1% per month on the premium owed. Other penalties may be assessed for non-payment of premiums, misrepresentations, excessive deductions from employees, failure to keep adequate time sheets and payroll records, or other violations.

The penalties for delinquent premium payment are:

• One month overdue: 5% penalty + 1% interest
• Two months overdue: Additional 5% penalty + 1% interest
• Three months overdue: Additional 10% penalty + 1% interest
• Four+ months overdue: Additional 1% interest on premiums for each month

How to File Workers’ Compensation Claims in Washington

Washington employers and their employees have certain legal responsibilities when a work-related injury occurs. As an employer, you want to make sure your employee immediately receives necessary medical care. They may choose their own healthcare provider, but their provider must be a part of the L&I Medical Provider Network.

Employees may see a non-network provider for the initial visit, but for additional or ongoing care, they will need to transfer to a network provider. Employers should also provide transportation or emergency ambulance service, if needed. Upon written request, L&I reimburses these transportation costs.

Once an injured employee receives the care they need, the claim process can begin:

1. Submit your employer information to L&I as soon as possible, including a copy of the Form F242-130-000, Report of Accident (Workplace Injury, Accident or Occupational Disease. To expedite the process, employers can use L&I’s FileFast tool.
2. Verify your employee’s information such as gross wages and hours worked.
3. If you question the validity of a claim, state it on the form and explain your reasons why to help minimize invalid claims.
4. Track the claim by using the online Claim and Account Center (CAC) to stay current.
5. Stay in touch with your employee and do what you can to get them back to work as soon as possible. Plan ahead with a stay-at-work program.
6. When your employee is ready to return to work, provide light-duty work or reduce their number of hours.

Washington state workers’ compensation claims are closed if an employee’s healthcare provider certifies that further treatment won’t improve their condition, L&I has no information showing they need further treatment, or their injury was minor and treatment was successful.

How to Appeal a Washington Workers’ Comp Claim

If an employer doesn’t think their employee’s workers’ comp claim is valid, they should note it on L&I’s Report of Accident form. Within 60 days of a decision by L&I to accept the employee’s claim, an employer can file a protest through L&I’s Claim & Account Center.

Employers can file an appeal with the Washington Superior Court within 30 days of L&I’s decision, then further appeal the matter to the Court of Appeals.

Washington Workers’ Comp Insurance Frequently Asked Questions (FAQ)

Workers’ compensation insurance is a complicated topic for business owners to understand because regulations vary widely from state to state. Here are a few commonly asked questions about Washington workers’ comp insurance.

Do self-employed people need workers’ compensation in Washington?

Sole proprietors and business owners do not typically need workers’ compensation insurance in Washington state. LLC members, corporate officers, and partners in partnerships are also exempt from coverage requirements. However, there are options available for an owner or sole proprietor who would like to elect workers’ comp coverage.

Can I reduce Washington state workers’ compensation costs?

In Washington, employers can reduce workers’ comp costs by preventing injuries in the first place. The state advises businesses to follow all safety and health workplace rules, request a free safety and health consultation, and communicate openly with employees about their commitment to safety. Employers should encourage employees to come forward with safety concerns and make sure they know how to report all work-related injuries.

Do I need workers’ compensation for out-of-state employees?

You are required to purchase workers’ comp insurance for all the states where your workers’ are located, according to each state’s laws. This is true if your employees are permanently or temporarily working out of state.

Washington has reciprocal agreements with eight states that keep the home state’s workers’ comp laws in effect for employees who are temporarily working in another state. The reciprocal agreements vary in the extent this coverage is permitted.

Bottom Line

Workers’ compensation insurance is mandatory in Washington state for employers with one or more employees to cover medical expenses and replacement wages after a work-related injury or illness. As a monopolistic state, workers’ compensation insurance in Washington must be obtained from the state fund, or you may opt to self-insure.