If you're starting a business in Vermont or already running one, here's something you need to know right away: the moment you hire your first employee, you need workers' compensation insurance. Not when you hit five employees. Not when you hire your tenth. From day one.
Vermont takes workers' comp seriously, and recent changes in 2025 have made compliance even more stringent. Whether you're running a ski resort, a maple syrup operation, or a tech startup in Burlington, understanding these requirements isn't optional—it's essential to protecting your business and your people.
Who Needs Workers' Compensation in Vermont?
Here's the straightforward answer: if you have employees, you need coverage. Vermont law doesn't mess around with employee thresholds. One part-time barista? You need it. One seasonal worker for your summer farm stand? You need it. The coverage requirement kicks in immediately.
This applies regardless of your business structure. Whether you're a sole proprietorship, partnership, LLC, or corporation, the rule is the same: employees mean coverage. The Vermont Department of Labor administers the program, and you'll purchase your policy through private insurance carriers—Vermont uses a competitive market model, not a state-run monopoly fund.
Who's Exempt from Coverage?
Vermont does carve out a few specific exemptions, and understanding them can save you money if you qualify. Corporate officers, LLC members, partners, and sole proprietors are automatically excluded from mandatory coverage. That means if you're the owner, you're not required to cover yourself—though you can opt in if you want the protection.
Agricultural and farm workers have a specific exemption: if you're running a farm operation with less than $10,000 in annual aggregate payroll, those workers may be exempt. Family members who live with you and work in your business are also exempt. But be careful here—if your farm payroll crosses that $10,000 threshold, you're suddenly on the hook for coverage.
One important note: just because you're exempt doesn't mean opting in is a bad idea. If you're a sole proprietor working in construction or another high-risk field, covering yourself could protect you from devastating medical bills if you get hurt on the job.
What Changed in 2025? New Compliance Rules You Need to Know
On May 28, 2025, Governor Phil Scott signed SB 117 into law, introducing some of the most significant updates to Vermont's workers' compensation system in years. These changes went into effect on July 1, 2025, and they mean new obligations for employers.
First, translation services are now mandatory. If you have an injured employee who doesn't speak English fluently, you're required to provide translation assistance. This isn't a suggestion—it's the law. The goal is to ensure injured workers can fully understand their rights and navigate the claims process, and employers who fail to provide this support face compliance issues.
Second, late benefit payments now trigger escalating penalties. If you're late paying an injured worker's benefits, you'll face a 5% penalty on the first offense, 10% on the second, and 15% for the third and any subsequent violations. Starting October 1, 2025, employers must also report late payments quarterly for one year, and failing to submit those reports carries a $500 penalty.
Medical case management also got formalized. It's now defined in statute and available when recommended by a healthcare provider or supported by evidence. This change aims to improve outcomes for injured workers while giving employers clearer guidelines on when and how case management should be used.
What Happens If You Don't Comply?
Vermont doesn't play games with workers' comp violations. The penalties are designed to hurt enough that you'll take compliance seriously. If you're caught operating without coverage, the clock starts ticking immediately. For the first seven days, you'll pay $100 per day. After that? The penalty jumps to $150 per day, and it keeps accumulating until you get coverage in place.
But financial penalties are just the beginning. Vermont can issue a stop-work order, effectively shutting down your business until you come into compliance. If you continue to operate without coverage, you're looking at misdemeanor charges. And here's the part that really stings: if an employee gets injured while you're uninsured, you're personally liable for all medical costs, lost wages, and disability benefits. We're talking potentially hundreds of thousands of dollars out of your own pocket.
You're also required to post a notice of compliance in a conspicuous location at your workplace. This isn't bureaucratic busywork—it's how employees know their rights are protected. Failing to post this notice is another compliance violation that can trigger penalties.
How to Get Workers' Compensation Insurance in Vermont
Getting coverage isn't complicated, but it does require some planning. Start by contacting insurance carriers that offer workers' compensation in Vermont. Because Vermont operates a competitive market, you'll shop around just like you would for any other business insurance. Your premium will depend on your industry classification, payroll size, and claims history.
If you're a larger employer with strong financials and a solid safety record, you might qualify for self-insurance. This route requires approval from the state and proof that you can handle claims on your own, but it can offer more control and potentially lower costs. Most small to mid-sized businesses will stick with traditional insurance carriers.
When an injury occurs, you'll need to file an Employer First Report of Injury using Vermont Department of Labor Form 1. This is mandatory even if you dispute the facts of the injury or whether it's work-related. File it promptly—delays create problems and can look like you're trying to dodge responsibility.
Your Next Steps
If you're already operating with employees and don't have coverage, your first priority is fixing that immediately. Contact an insurance agent today—not next week, today. The penalties and liability exposure aren't worth the risk.
If you're planning to hire your first employee soon, build workers' comp into your budget before you post that job listing. It's a cost of doing business in Vermont, and factoring it in from the start prevents surprises. Check with the Vermont Department of Labor's website for forms, guidance documents, and detailed information about your obligations as an employer.
Workers' compensation isn't just a legal checkbox—it's protection for your employees when they need it most and a shield for your business from catastrophic financial liability. Get it right from the start, stay current with Vermont's evolving requirements, and you'll avoid headaches down the road.
