Nonprofit Workers’ Compensation: Are Nonprofits Exempt From Coverage?
Workers’ compensation insurance is widely recognized as a legal requirement for most for-profit businesses, and nonprofit organizations often ask whether the same rules apply to them.
The answer? It isn’t always straightforward.
Nonprofit Workers’ Compensation requirements vary by state and depend on an organization's structure, who it employs, and how its programs operate. Here’s a breakdown of how Workers’ Compensation laws typically apply to nonprofit organizations and the factors that determine whether coverage is required.
Are Nonprofits Required to Carry Nonprofit Workers’ Compensation Insurance?
There is no universal rule that applies to all nonprofits nationwide. Work Comp laws are governed at the state level, meaning requirements and exemptions can differ significantly depending on where an organization operates.
In most cases, the obligation to carry Workers’ Compensation insurance is determined by two primary factors:
- The state in which the nonprofit operates
- The organization’s employment structure
State-by-State Workers’ Compensation Requirements
Some states allow exemptions for certain nonprofit organizations, while others require coverage regardless of nonprofit status. To remain compliant, nonprofits must understand the specific Workers’ Compensation statutes in each state where they have employees.
States may consider several criteria when determining whether a nonprofit must carry Workers’ Compensation insurance, including:
● The number of employees on staff
● How the organization is legally classified
● Total payroll or wages paid
● The number of hours employees work
For example, one state may require coverage only after a nonprofit employs a minimum number of workers, such as five. Another state may mandate Workers’ Compensation coverage for every employee from day one, regardless of headcount or nonprofit designation.
Because of these differences, nonprofits operating in multiple states face additional complexity and must ensure compliance in each jurisdiction.
How Volunteers Are Treated Under Workers’ Compensation Laws
Volunteers are a vital part of many nonprofit operations – but they are typically treated differently from paid employees under Workers’ Compensation laws.
In general, nonprofits are not required to provide Workers’ Compensation coverage for volunteers since they do not receive wages. However, this is not a universal rule. Some states may classify volunteers as employees under certain circumstances, such as when volunteers work a large number of hours or perform duties similar to those of paid staff.
Other states may explicitly exclude volunteers from Workers’ Compensation eligibility altogether. This variation can create confusion and potential coverage gaps if nonprofits assume volunteers are automatically excluded.
As a result, many nonprofits choose to supplement their risk management strategy with Accident & Health insurance for volunteers to help cover medical expenses for injuries that occur while volunteering.
Why Workers’ Compensation Decisions Are Especially Important for Nonprofits
Nonprofits often serve children, seniors, and other vulnerable populations, which can increase workplace exposure for staff and volunteers alike.
Injuries can occur during:
- Transportation
- Program activities
- Facility operations
- Community outreach
Without proper Workers’ Compensation coverage, a single claim could place financial strain on an organization and disrupt services.
Because Work Comp rules are highly state-specific and tied closely to operational details, nonprofits benefit from working with specialists who understand these nuances and can help align coverage with actual risk.
About Charity First
Charity First specializes exclusively in nonprofit, human service, and social service organizations, supporting retail partners nationwide with consistent underwriting, responsive service, and risk management expertise.
Our solutions include Nonprofit Workers’ Compensation, General Liability, and Accident insurance for volunteers and participants – helping organizations protect their people while continuing to serve their communities with confidence.
To learn more, contact Charity First at email marketing@charityfirst.com