If you're running a business in Virginia, here's something you need to know right away: the state takes workers' compensation seriously. Really seriously. Unlike some states where the rules are fuzzy or the penalties are slaps on the wrist, Virginia has clear requirements and doesn't mess around with enforcement. The good news? Once you understand what's required, staying compliant is straightforward.
Whether you're hiring your first employee, bringing on contractors, or expanding your team, this guide will walk you through everything you need to know about Virginia's workers' comp requirements. We'll cover who needs coverage, who's exempt, what happens if you don't comply, and how to get the right protection for your business.
The Three-Employee Threshold: When Coverage Kicks In
Virginia's rule is simple: if you regularly employ more than two employees, you need workers' compensation insurance. That means coverage becomes mandatory when you hit three employees. Notice the word "regularly"—this isn't about occasional help. If you have three people on payroll consistently, you're required to carry coverage.
Here's where it gets broader than you might expect: "employee" under Virginia law includes part-time workers, seasonal staff, temporary employees, minors, trainees, immigrants, and even working family members. Your nephew who helps out during busy season? He counts. The part-timer who works weekends? She counts too. Executive officers of your company also count as employees for this calculation.
And there's another curveball: if you hire subcontractors to perform the same trade, business, or occupation as your company, their employees count toward your total. So if you're a contractor with two direct employees and you hire a subcontractor with two employees to help on a job, you've now got four employees in the eyes of Virginia law. That triggers the requirement for coverage.
Who's Actually Exempt? (Spoiler: Very Few People)
Virginia doesn't hand out exemptions like candy. In fact, there's really only one clear-cut exemption: sole proprietors with no employees and no subcontractors. If you're a one-person operation doing all the work yourself, you're not required to carry workers' comp coverage. That's it. That's the exemption.
Here's something important: Virginia doesn't issue exemption waivers or certificates. Some states let certain workers sign forms saying they don't want coverage. Not Virginia. The state simply doesn't require coverage if you don't meet the employee threshold, but they won't give you a piece of paper confirming your exempt status.
Now let's talk about independent contractors, because this is where many business owners get tripped up. As of July 1, 2020, Virginia law presumes that all workers are employees unless you can prove they meet IRS standards for independent contractor classification. This presumption flips the burden of proof onto you as the employer. The determination depends on factors like who controls how the work is done, whether the worker is integrated into your business operations, and other IRS criteria. If someone is misclassified as an independent contractor when they're actually an employee, you could be on the hook for not having them covered.
For construction businesses, this matters even more. All on-site workers must be covered—even subcontractors—unless they can demonstrate they meet IRS independent contractor rules. The smart move? Get proof of workers' comp coverage from every subcontractor you hire. At audit time, you won't be charged premium for subcontractors who provide valid proof of their own coverage.
What Happens If You Don't Comply? (You Really Don't Want to Find Out)
Virginia doesn't play around with workers' comp violations. The penalties are designed to hurt enough that you won't risk operating without coverage. Let's break down what you're facing if you skip this requirement.
First, there are civil penalties: up to $250 per day of non-compliance, with a maximum total penalty of $50,000. That's not a one-time fine—that's daily. If you operate without coverage for six months, you could be looking at the maximum penalty. And that's just the beginning.
Second, there are criminal charges. Failure to carry required workers' comp insurance is a misdemeanor in Virginia, punishable by up to $1,000 in fines and up to six months in jail. Yes, jail time is on the table for this violation.
Third—and this is the one that can bankrupt a business—you become personally liable for paying all benefits to injured employees. If someone gets hurt on the job and you don't have coverage, you're paying their medical bills out of pocket. You're covering their lost wages. You're handling their rehabilitation costs. A serious injury can easily run into hundreds of thousands of dollars. And unlike when you have insurance, injured employees can sue you directly in court for damages, including pain and suffering, which aren't covered under normal workers' comp claims.
The Virginia Workers' Compensation Commission can also issue stop-work orders, shutting down your business until you get compliant. Imagine losing days or weeks of revenue because you tried to save money on insurance premiums. The math doesn't work out in your favor.
How to Get Workers' Comp Coverage in Virginia
Virginia operates as a competitive state for workers' compensation, which means you have options for how to obtain coverage. You're not stuck buying from a state-run monopoly. Here are your four paths to compliance:
A commercial insurance carrier is the most common route for small and medium-sized businesses. You shop around, get quotes, and purchase a policy just like any other business insurance. Rates vary based on your industry, payroll, and claims history, so it pays to compare options.
Becoming an authorized self-insurer is an option for larger companies with strong financials. You essentially become your own insurance company, setting aside funds to cover potential claims. This requires approval from the Virginia Workers' Compensation Commission and proof that you have the financial resources to handle claims.
A licensed group self-insurance association allows multiple employers in similar industries to pool their resources and share risk. This can be more affordable than individual policies for some businesses, particularly in industries with lower risk profiles.
A registered professional employer organization (PEO) is another option. PEOs essentially co-employ your workers, handling HR, payroll, and benefits—including workers' comp. This can be attractive for small businesses that want to outsource administrative headaches.
Reporting Requirements and Staying Compliant
Getting coverage is step one. Staying compliant is step two. Virginia uses an Electronic Data Interchange (EDI) system for reporting workers' comp claims. When an injury occurs, your insurer files a First Report of Injury (FROI) electronically with the Virginia Workers' Compensation Commission. Subsequent Reports of Injury (SROI) track the progress of claims over time.
As of January 1, 2026, the Commission implemented new penalty schedules for late reporting by insurance carriers, self-insured employers, and individual self-insurers. This means everyone in the system has an incentive to report promptly and accurately. For you as an employer, this means you need to notify your insurance carrier immediately when an injury occurs—don't wait.
You also need to maintain accurate payroll records, because your premium is calculated based on payroll. At audit time, your insurer will review your actual payroll for the policy period and adjust your premium accordingly. If you misclassify employees or underreport payroll, you could face significant premium adjustments and penalties.
Next Steps: Getting the Right Coverage
If you're approaching the three-employee threshold or you've already crossed it without coverage, don't panic—but do act quickly. Start by getting quotes from commercial carriers who specialize in your industry. Rates can vary significantly, so compare at least three options.
Make sure you understand how your employees are classified for premium purposes. Different job classifications carry different risk ratings and different premium costs. A roofer pays more than an office administrator because roofing is inherently more dangerous. Your insurer will assign classification codes based on the work your employees do.
If you work with subcontractors, get certificates of insurance from each one proving they carry their own workers' comp coverage. Keep these certificates on file. This protects you from being charged for their payroll at audit and ensures you're not inadvertently responsible for their employees.
Workers' compensation isn't the most exciting part of running a business, but it's one of the most important. In Virginia, the rules are clear and the consequences for non-compliance are real. The good news is that once you have the right coverage in place, you can focus on growing your business knowing that both you and your employees are protected if something goes wrong. Don't wait until you need it to wish you had it.
