If you're starting a business in Delaware or hiring your first employee, here's something you need to know right away: Delaware doesn't mess around with workers' compensation insurance. Unlike some states that give you breathing room until you hit three or five employees, Delaware requires coverage the moment you bring on your first worker. No grace period, no exceptions for "just one part-timer."
This can catch new business owners off guard, especially if you're used to how things work in neighboring states. But there's a reason Delaware takes this seriously: workers' comp protects both you and your employees when workplace injuries happen. And the penalties for skipping it? They're steep enough to put a small business under.
The One-Employee Rule: Delaware's Coverage Threshold
Under Title 19, Chapter 23 of the Delaware Code, any employer with at least one employee must carry workers' compensation insurance. It doesn't matter if that employee works two hours a week or forty. Part-time, full-time, seasonal—they all count. The law is crystal clear on this point.
This means if you're a solo operation right now, you're off the hook. But the day you hire help—even a college student for the summer—you need coverage in place. Not next week. Not when you get around to it. That day.
The good news? Delaware is a competitive state for workers' comp, meaning you can shop around among private insurance carriers for the best rate. You're not stuck with a state monopoly fund like in Ohio or Washington. This gives you leverage to find affordable coverage that fits your business.
Who's Actually Exempt? Understanding Delaware's Exceptions
While the one-employee rule sounds absolute, there are specific categories of workers who fall outside Delaware's workers' comp requirements. These exemptions are narrowly defined, and misclassifying someone can land you in hot water.
Farm workers are the big one. Agricultural employees are exempt from Delaware's workers' compensation statute, though farmers can voluntarily provide coverage if they choose. If you run a farm, this gives you flexibility—but remember that opting in might make sense for liability protection and employee recruitment.
Sole proprietors and business partners are also excluded from mandatory coverage, but they can elect to include themselves. This is worth considering—if you get hurt on the job, workers' comp will cover your medical bills and lost income. Without it, you're paying out of pocket.
Corporate officers and LLC members are automatically included in coverage, but they can opt out with state approval. This requires filing paperwork with the Delaware Department of Labor's Office of Workers' Compensation, so don't assume you can just skip coverage without going through the formal process.
Household workers earning less than $750 in cash during any three-month period from a single household are also exempt. This covers domestic help like housekeepers or nannies who work limited hours.
The Construction Industry Exception: Why Contractors Can't Dodge Coverage
Here's where Delaware gets really specific: if you're in the construction industry, you cannot classify yourself or your workers as independent contractors to avoid workers' comp requirements. The law explicitly states that construction industry businesses "shall be deemed to be an employer" regardless of how they structure their workforce.
This matters because construction is inherently risky. Falls, equipment accidents, repetitive strain injuries—they're all common on job sites. Delaware knows that leaving construction workers without coverage creates a public burden when injuries happen, so the state closed the independent contractor loophole for this industry specifically.
If you're a general contractor, this also means you need to verify that your subcontractors carry their own workers' comp insurance. If they don't, their employees could be considered your employees under the law, and you could be liable for coverage.
What Happens If You Don't Comply? Delaware's Penalty Structure
Let's talk about the consequences of skipping workers' comp in Delaware, because they're designed to hurt. The state doesn't just slap you with a fine and move on—they hit you where it counts.
First, there's the civil penalty: up to three times what you would have paid in insurance premiums. If you previously had coverage and let it lapse, the penalty is based on three times your last premium for a full year. If you've never had coverage, they calculate it using the most expensive policy premium charged by any carrier in Delaware for your type of business—then multiply that by three.
But it gets worse. If you continue operating without coverage after the Department of Labor notifies you, you face an additional penalty of $10 per employee per day, with a minimum of $250 per day. That adds up fast. Ten employees? That's $100 a day minimum, or $36,500 a year—probably more than the insurance would have cost in the first place.
And here's the kicker: if an employee gets injured while you're uninsured, you're personally liable for all their medical expenses and lost wages. Not capped. Not limited. All of it. A serious injury could bankrupt your business and follow you personally.
The Department of Labor also has the authority to seek an injunction to shut down your business until you comply. That means no revenue, no operations—just legal fees and lost time while you scramble to get coverage in place.
How to Get Coverage and Stay Compliant
Getting workers' compensation insurance in Delaware is straightforward. You have two main options: purchase a policy from a private insurance carrier authorized to do business in Delaware, or if you can demonstrate sufficient financial resources, you may qualify to self-insure with Department approval.
For most small businesses, buying a policy is the way to go. Your premium will depend on your industry classification code, payroll, and claims history. High-risk industries like roofing or demolition pay more than low-risk businesses like consulting or accounting. But since Delaware is a competitive market, you can get quotes from multiple carriers to find the best rate.
Make sure your coverage is in place before your first employee's first day of work. Don't wait until after they've started. Insurance carriers need time to process applications, and gaps in coverage—even short ones—can trigger penalties if an injury occurs.
Once you have coverage, you'll need to post a notice in a conspicuous place at your workplace informing employees of their rights under workers' compensation law. Your insurance carrier will typically provide this notice, but you're responsible for displaying it.
Finally, keep your policy current. Set a calendar reminder for renewal time, and if you're ever going to let coverage lapse because you're closing the business or no longer have employees, notify the state to avoid penalties for a gap that looks like non-compliance.
Delaware's workers' compensation requirements are strict, but they're also clear. If you have employees, you need coverage—no ifs, ands, or buts. The penalties for non-compliance are severe enough that cutting corners isn't worth the risk. Get covered from day one, keep your policy current, and you'll protect both your employees and your business from financial disaster.
