Workers' Comp for Startups With Remote Employees in Multiple States
The short answer: Workers' compensation generally follows the place where an employee actually works, so each remote employee in a new state usually brings that state's rules into play, even when your company has no office there. Your policy has to list or be able to reach every state where your people work, four states (North Dakota, Ohio, Washington and Wyoming) require coverage through a state fund instead of a private carrier, and your insurer needs to hear about each new state promptly. The cheapest time to sort this out is before the offer letter goes out.
In this article
- Which state's law applies to a remote employee
- How a policy handles more than one state
- The four states you cannot buy privately
- What goes wrong when you hire and tell no one
- How premium works across states
- Business travel and temporary work in other states
- A checklist before each out-of-state hire
- Frequently asked questions
Which state's law applies to a remote employee?
For most remote employees it is the state they work from, because that is where their work is considered localized. Legal commentators describe the test as fact specific, looking at where the person regularly works, where they live, and where they spend a substantial part of their working time, and most remote employees end up localized in the state where they sit at their desk. Employees who travel across several states regularly make the analysis more complicated, and states do not all use the same test.
It helps to separate two questions that founders often blend together. The first is which state's law decides whether an injury is compensable and what benefits are owed, and that is generally the state where the claim is made. The second is whether your insurance policy will actually pay, and that depends on how your policy lists states. A company incorporated in Delaware with headquarters in New York and an engineer working from Colorado is a good example, since the Colorado claim can be decided under Colorado law while the New York policy still has to be able to respond to it.
How does a workers' comp policy handle more than one state?
The Information Page of a standard workers' comp policy contains the two items that matter most. Item 3.A lists the states where you operate and have coverage in place, which means the carrier has formally filed for those states. Item 3.C is other states coverage, which generally reaches every state except the state-fund states and a few territories, and carriers often park states with no known activity there. If work begins in a 3.C state after the policy starts, the policy generally treats it like a listed state, but you are expected to notify the carrier right away, and the policy does not define how fast that has to be.
| Where the employee works | What usually happens | What to do |
|---|---|---|
| State is listed in 3.A | Coverage responds under that state's rules | Keep payroll for the state accurate |
| State is in 3.C only | Coverage depends on prompt notice to the carrier | Report the new state at once and ask for it to be added to 3.A |
| State is not covered at all | The carrier may dispute the claim, and you may owe the gap in benefits | Fix before the first day of work, not after an injury |
| State is a state-fund state | A private policy cannot cover it | Register with the state fund and add stop gap coverage |
One practical point from broker guidance is worth keeping in mind. When an employee could claim under more than one state's law, the more favorable benefits can matter, so listing every state where people actually work is the prudent approach, and it is much easier at renewal when everything is declared up front.
Which states do not allow private workers' comp insurance?
Four states are monopolistic, meaning employers there must buy workers' compensation from the state fund and private carriers cannot provide it: North Dakota, Ohio, Washington and Wyoming. Puerto Rico and the U.S. Virgin Islands also use state funds. If even one remote employee lives in one of these states, the policy that covers your other states will not respond for that person, and you need to register with the state's own fund, which uses its own forms and classification system.
State-fund coverage also does not include employer's liability, which protects you if an injured employee or a family member sues you outside the workers' comp system. The usual answer is stop gap coverage, which is an endorsement added to your general liability policy for employees in those states. If you hire in one of these four states, ask your broker for both pieces, since most startups only learn about the second one after the first claim.
What goes wrong when you hire in a new state and tell no one?
The most common failure is quiet rather than dramatic. A founder hires someone in a new state, the employee starts working, and nobody tells the insurer because the policy already says workers' comp. Months later an injury happens, and the question becomes whether that state was listed, whether it fell under other states coverage, and whether the carrier was told in time. Broker guidance on this exact scenario concludes that a policy may not respond when the employer missed the notice window, and that the employer can end up owing the difference between what the carrier pays and what the employee's state requires.
Going without coverage in a state that requires it is worse. Employment law commentary notes that uninsured employers can face criminal and civil penalties, along with liability for the lost benefits and the injured worker's attorney fees. Those consequences sit on top of your own medical and wage obligations, which is a heavy load for a company with a handful of employees.
How is workers' comp premium calculated for a team in many states?
Premium is built from payroll reported separately for each state and each job classification, multiplied by the rate that applies in that state. The same desk job can cost more in one state than another because each state sets or approves its own rates and rules, and the carrier trues the numbers up at an annual payroll audit. That is why a clear headcount and payroll by state is the first thing a broker asks for.
Classification also matters for remote teams. Clerical work at an employer's premises is generally classified under code 8810, and a separate clerical telecommuter code, 8871, has been introduced for clerical employees who work from home more than half the time and are not otherwise included in the employer's basic classification. Texas, for example, adopted it for policies effective on or after July 1, 2026, and the new code starts with the same loss costs as 8810 until it develops its own experience. Whether a given state has adopted it varies, so ask your broker how your remote staff will be classified in each state.
What about business travel and temporary work in other states?
Some states have reciprocal arrangements that let an employer bring employees in temporarily without buying separate in-state coverage. To rely on one, you generally need extraterritorial coverage on your existing policy and may have to show proof of it to the other state's agency. Reciprocity rules differ by state and by how long the work lasts, so a team that regularly works from another state, such as an engineer who spends a quarter at a remote site, should be treated as a multi-state employee and not as a visitor.
It is also worth checking how your other policies line up. Employment practices liability and directors and officers insurance can respond differently to remote employees in different states, and employment practices liability (EPL) in particular should be reviewed whenever your hiring footprint changes.
A checklist before each out-of-state hire
- Look up the new state first. Confirm whether the state requires coverage for your headcount and whether it is a state-fund state.
- Tell your broker before the start date. Ask for the state to be added to item 3.A or confirmed under 3.C, and get the confirmation in writing.
- Update payroll reporting. Make sure your payroll provider tags each employee by work state so the audit matches your records.
- Confirm the classification. Ask how remote clerical or software roles will be classified in that state.
- Check contractors. Review anyone paid as a contractor, since states apply their own tests and reclassification can create an uninsured exposure.
- Review at every renewal. Send an updated list of states and payroll, because the 3.C notice clock can start when the policy renews.
- Add stop gap if needed. Any employee in North Dakota, Ohio, Washington or Wyoming needs both state-fund registration and stop gap coverage.
How we approach this at Alton Risk
When a startup asks us for workers' comp, the first thing we ask for is a list of employees by home state, with expected payroll and the role each person performs. That single page tells us which states to list, whether a state fund is involved, and where the classification questions will come up, and it makes the quote more accurate before an underwriter ever sees it. As the team grows, we recommend sending the same page at every hire and every renewal so the policy keeps up with where your people actually are.
Hiring in a new state?
Send us your headcount by state and we will tell you which states to list, whether a state fund applies, and what it should cost to cover the team. You can start a quote in a few minutes, or write to connect@altonrisk.com and we will begin with your current policy.
Get a workers' comp quote →Related reading: Workers' Comp for Startups: Buy Before Your First Hire · Quick quotes for general liability and workers' comp · Startup insurance by stage · Workers' compensation, defined
Frequently asked questions
Do I need workers' comp in a state where I only have one remote employee?
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Usually yes. Workers' compensation generally follows where the employee actually works, so a single remote employee in a new state typically brings that state's rules into play, even if your company has no office there. Thresholds and exemptions differ by state, so confirm the rule for each state with your broker.
Which state's workers' comp law applies to a remote employee?
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In most cases it is the state where the employee is working from, because that is where the work is localized. Your insurance policy decides who pays the claim, while the state where the claim is made decides whether the injury is compensable and what benefits are owed.
What is the difference between 3.A and 3.C on a workers' comp policy?
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Item 3.A lists the states where you are operating and have coverage in place. Item 3.C is other states coverage, which can respond if work starts in an unlisted state, but it generally excludes the four state-fund states and usually requires you to tell the carrier promptly when employees begin working there.
Which states do not allow private workers' comp insurance?
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North Dakota, Ohio, Washington and Wyoming are monopolistic states, meaning employers must buy workers' comp from the state fund. Puerto Rico and the U.S. Virgin Islands also use state funds. Employers with employees in those places usually add stop gap employer's liability coverage to a separate policy.
Is an injury at home covered by workers' comp?
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It can be, if the injury arises out of and in the course of employment. Whether a particular injury qualifies depends on the facts and on the law of the state where the claim is filed, which is one more reason the employee's state needs to be on your policy.
What happens if I hire in a new state and do not tell my insurer?
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The carrier may treat the claim differently than you expect. Depending on the policy and the state, coverage might be disputed or limited, and the employer can end up owing the gap between the benefits the policy pays and what the employee's state requires. Uninsured employers can also face penalties, lost benefit liability and attorney fees.
How is workers' comp premium calculated for a team in many states?
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Premium is built from payroll, reported by state and by job classification, multiplied by the rates that apply in each state. The same office role can cost different amounts in different states, and the final figure is trued up at the annual payroll audit.
Do independent contractors need workers' comp?
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Generally not when they are properly classified, but every state applies its own test, and workers who are treated as contractors can be reclassified as employees. Misclassification is a common reason startups discover they were uninsured after an injury.
Can't find an answer to your questions? Reach out to our team →
This article is general information and not legal advice, since workers' compensation rules vary by state. Sources: AssuredPartners, The Effect of Employees Working From Home on Workers' Compensation Coverage (opens in a new tab); Ogletree Deakins, Multistate Compliance for Employers With Out-of-State Remote Employees (opens in a new tab); The Hartford, Monopolistic States for Workers' Compensation (opens in a new tab); Texas Mutual, TDI and NCCI Updates, May 2026 (opens in a new tab).