Does My Arkansas Business Need Workers’ Comp?
Three employees is the general rule and it is written into the statute — along with two other thresholds that catch construction and anyone who subcontracts. The numbers are not industry folklore. They are in the definition of “employment.”
Short Answer
Arkansas defines “employment” at four thresholds, not one. Three or more employees regularly employed in the course of business generally; two or more for anyone engaged in building or building repair work; and one or more both for a contractor who subcontracts any part of a contract and for a subcontractor. If you are a trade in Northwest Arkansas, the number that applies to you is probably not three.
Most coverage questions are answered by the policy. This one is answered by a statute, and the statute is more specific than the version that circulates. The thresholds below are not industry rules of thumb or figures reported by insurance sites — they are in Ark. Code § 11-9-102(11), in the definition of what counts as “employment” for the whole chapter.
Four Thresholds, Not One
What the definition actually says
Section 11-9-102(11) sets out employment as: (A) every employment in the state in which three or more employees are regularly employed by the same employer in the course of business, subject to the exclusions below; (B) every employment in which two or more employees are employed by any person engaged in building or building repair work; (C) every employment in which one or more employees are employed by a contractor who subcontracts any part of his or her contract; and (D) every employment in which one or more employees are employed by a subcontractor. Subsections B, C and D are not exceptions carved out of the three-employee rule. They are separate definitions that stand on their own, which is why a two-person building operation is inside the Act whether or not anyone has counted to three.
Where the (A) threshold does not reach
The same subsection excludes, among others, a domestic servant in or about a private home; a person employed to do gardening, maintenance, repair, remodeling or similar work in or about the private home or residence of the person employing them; agricultural farm labor; the State and its political subdivisions except as separately provided; and employment covered by a federal compensation program. These are exclusions from the definition itself rather than optional exemptions an employer elects, and whether a given arrangement falls inside one of them is a legal question about facts we cannot see from here.
Under § 11-9-401 an employer within the Act must secure the payment of compensation. That is the obligation the thresholds switch on.
The Provision That Catches General Contractors
An uninsured subcontractor becomes the prime contractor’s problem
Where a subcontractor fails to secure workers’ compensation insurance, the prime contractor is liable for compensation to that subcontractor’s employees. A contractor or insurer that becomes liable that way may recover from the subcontractor, and the claim for recovery constitutes a lien against money due or to become due the subcontractor. So the certificate a general contractor asks for is not paperwork for its own sake and not merely a contract condition — it is the mechanism by which somebody else’s injured employee does not become your claim. This runs in both directions: it is why you collect certificates from every sub, and why your own coverage is what gets you onto a site.
“They’re 1099” is not a threshold answer
Whether someone is an employee is decided by a legal test applied to how the work is actually performed, not by the form issued at year end or by what the parties agreed to call it. Arkansas has legislated on independent contractor status in recent years, and the determination is fact-specific. What is worth knowing here is the direction of the risk: getting it wrong can put you inside the Act without your having intended to be, and premium is calculated on payroll that includes people the audit concludes were employees.
If You Own the Business
Sole proprietors and partners are in by default and opt out in writing
The Act treats sole proprietors and partners as employees unless they file written notice with the Commission electing not to be. The default runs toward inclusion and the election is an affirmative filing, which is the opposite of how it is usually described. Electing out also does exactly what it says: an owner who has opted out has no compensation claim if they are hurt on a job, and that is a real trade rather than a formality. Plenty of owners who could elect out do not.
What Failing to Secure It Carries
The penalty provision is § 11-9-406, and it reads “or”
An employer required to secure the payment of compensation who fails to do so is subject to a fine of up to $10,000 as determined by the Workers’ Compensation Commission, payable to the Death and Permanent Total Disability Trust Fund, or is guilty of a Class D felony. The statute also states that this does not affect any other liability of the employer under the chapter. Separately, where an employer fails to secure payment or to pay an assessed civil penalty after an order has become final, the Commission may petition the circuit court for an order enjoining the employer from engaging in further employment until coverage is secured or the penalties are paid — a court injunction rather than an administrative notice.
A different section, often confused with it
§ 11-9-106 is the misrepresentation provision, and it is worth knowing separately because it reaches conduct people do not think of as fraud. Willfully and knowingly making a material false statement, concealing material information, or employing a scheme for the purpose of obtaining or avoiding workers’ compensation coverage or avoiding payment of the proper insurance premium is a Class D felony under that section, and a person who conspires to that end is guilty as a principal. Understating payroll or misdescribing what a crew does is the version of this that arises in practice.
The Trade the Act Makes
Workers’ compensation is not a tax on employing people. It is an exchange: the injured worker gets defined benefits without proving fault, and the employer gets the compensation system as the route those claims travel rather than ordinary litigation. That exchange is the reason the Act exists and it is what an employer inside the Act is buying beyond the claim payments themselves.
What we can and cannot tell you about losing it
It is commonly asserted that an uninsured employer forfeits that protection and can be sued directly. What we can point to precisely is narrower and still pointed: § 11-9-406 expressly provides that the fine or felony exposure does not affect any other liability of the employer under the chapter. Whether and how an injured worker may proceed against an uninsured employer beyond that is a question for an attorney and for the Commission rather than for an insurance agency, and we would rather say so than repeat a formulation we have not confirmed.
What This Page Does Not Cover
This page answers whether the Act reaches your operation. What the policy then costs, and why the deposit premium is only a starting figure, is a different and deeper subject — class code assignment, the payroll audit and what it examines, records to keep through the year, and how uninsured subcontractors land on your bill. All of that lives on our Arkansas workers compensation insurance page, which owns it. If you are past the threshold question, that is where to go next.
- Count everyone, then find which subsection you are in. Regularly employed in the course of business is the test for the first threshold, and the building-work and subcontracting subsections do not wait for it.
- If you subcontract any part of a contract, read subsection (C) again. Subcontracting is itself the trigger there, at a single employee.
- Collect a certificate from every subcontractor, every time. The prime contractor’s liability for an uninsured sub’s employees is statutory, and the lien that lets you recover afterward is a poor substitute for the certificate you did not collect.
- Confirm anything close to a line with the Commission. The exclusions in subsection (A) are legal determinations about particular facts, and this page is general information rather than a compliance opinion.
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Frequently Asked Questions
Does my Arkansas business need workers’ compensation insurance?
It depends which part of the definition of employment you fall under. Ark. Code 11-9-102(11) covers every employment in which three or more employees are regularly employed by the same employer in the course of business, every employment in which two or more employees are employed by a person engaged in building or building repair work, every employment in which one or more employees are employed by a contractor who subcontracts any part of a contract, and every employment in which one or more employees are employed by a subcontractor.
Is the Arkansas threshold lower for construction?
Yes. Under Ark. Code 11-9-102(11)(B), employment in which two or more employees are employed by any person engaged in building or building repair work is within the Act. That is a separate definition rather than an exception to the three-employee rule, so it applies on its own terms.
Do subcontractors need workers’ comp in Arkansas?
Under Ark. Code 11-9-102(11)(D), every employment in which one or more employees are employed by a subcontractor is within the Act. Subsection (C) separately covers every employment in which one or more employees are employed by a contractor who subcontracts any part of his or her contract, so the act of subcontracting is itself a trigger at a single employee.
What happens if my subcontractor has no workers’ comp?
Where a subcontractor fails to secure workers’ compensation insurance, the prime contractor is liable for compensation to that subcontractor’s employees. A contractor or insurer that becomes liable may recover from the subcontractor, and the claim for recovery constitutes a lien against money due or to become due the subcontractor. Collecting a certificate from every subcontractor is what keeps this from arising.
Do part-time employees count?
The statutory language for the first threshold is employees regularly employed by the same employer in the course of business, which is a question about the employment relationship rather than about hours. Whether a particular arrangement counts is fact-specific, and anyone near a threshold should confirm with the Arkansas Workers’ Compensation Commission rather than assume.
Do sole proprietors need workers’ comp in Arkansas?
The Act treats sole proprietors and partners as employees unless they file written notice with the Commission electing not to be, so the default runs toward inclusion and opting out is an affirmative filing. An owner who elects out has no compensation claim if they are injured, which is worth weighing separately from whether the election is available.
What is the penalty for not carrying workers’ comp in Arkansas?
Under Ark. Code 11-9-406, an employer required to secure the payment of compensation who fails to do so is subject to a fine of up to ten thousand dollars as determined by the Workers’ Compensation Commission, payable to the Death and Permanent Total Disability Trust Fund, or is guilty of a Class D felony, and the section states that this does not affect any other liability of the employer under the chapter. Where an employer fails to secure payment or pay an assessed penalty after an order is final, the Commission may petition the circuit court to enjoin the employer from engaging in further employment.
Is calling someone a 1099 contractor enough to keep them off the count?
No. Employment status is decided by a legal test applied to how the work is actually performed rather than by the form issued or the label the parties use. Getting it wrong can place a business inside the Act without its having intended to be, and premium is calculated on payroll that includes anyone an audit concludes was an employee.
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Disclaimer: This article is general information and is not insurance, legal, tax or financial advice, and it is not a substitute for the terms of your own agreements or policies. This page is general information about Arkansas workers’ compensation law and is not legal advice or a compliance determination. Statutory provisions are summarized in substance rather than reproduced, carry conditions and exceptions not fully set out here, and may be amended. Whether a particular worker is an employee, whether an exclusion applies, and whether a business falls within the Act are legal determinations that depend on facts specific to the operation. Confirm your obligations with the Arkansas Workers’ Compensation Commission or qualified counsel before acting. Coverage is set by the insurance company and is subject to the terms, conditions and exclusions of the policy actually issued to you, which controls in every case. Cribb Insurance Group Inc is an independent insurance agency licensed in Arkansas, Oklahoma, Missouri and Texas. Reviewed 2026-08-10; insurance law and carrier filings change, and this article may not describe the current position after that date. Cribb Insurance Group Inc, 1601 SW Regional Airport Blvd, Bentonville, AR 72713 · (479) 286-1066 · service@cribbinsurance.com.