Maryland Workers Compensation Exclusion Forms
Maryland Workers Compensation Exclusion Forms: What LLC Owners and Contractors Need to Know
If you own a Limited Liability Company (LLC) in Maryland, understanding your obligations regarding workers’ compensation is essential. Many business owners mistakenly believe they’re automatically exempt, but that assumption can lead to costly consequences if youdo not have a MAryland workers compensation exclusion form on file.
The Maryland Workers Compensation Commission (WCC) has ramped up enforcement, particularly targeting businesses without active workers’ comp policies. They’re now actively calling LLC owners to hearings, requiring proof that either a valid policy or a signed exclusion form is on file. Failing to comply could result in fines ranging from $10,000 to $25,000—a costly oversight for any small business.
In this blog, we’ll break down what the exclusion form is, who needs to file it, why subcontractor documentation matters, and what steps you need to take today to avoid penalties.
What Is the Maryland Workers Compensation Exclusion Form?
Maryland law mandates that most employers carry workers’ compensation insurance to cover employee injuries or illnesses related to their job. But what about business owners or members of an LLC?
That’s where the Workers Compensation Exclusion Form (IC-16) comes into play. This document allows eligible LLC members, corporate officers, or sole proprietors to formally waive their right to workers’ compensation coverage. It’s not enough to simply not buy a policy—you must proactively file this form with the Maryland Workers’ Compensation Commission to be considered officially exempt.
Here’s the catch: You must own at least 20% of the business to qualify for the waiver. And just as importantly, you need to submit the form proactively. Maryland doesn’t consider you exempt unless they have this form on file.
Why the WCC Is Cracking Down
Over the past year, the WCC has significantly increased its enforcement of workers’ comp laws. If your LLC doesn’t have a workers’ compensation policy or a valid IC-16 exclusion form on file, you may be summoned to a formal hearing.
At these hearings, businesses are asked to prove they are either:
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Covered by an active workers’ compensation policy; or
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Officially excluded through a valid, submitted IC-16 form.
Failing to do so can result in hefty fines ranging from $10,000 to $25,000. And these aren’t just empty threats. Maryland has already imposed such fines on numerous businesses.
Why Subcontractor Coverage Matters—A Lot
Many Maryland business owners think hiring subcontractors relieves them of workers’ comp responsibilities. Unfortunately, that’s not always true.
Here’s what you need to know:
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If your subcontractor does not carry their own active workers’ compensation policy or have a valid exclusion form filed with the WCC, then your business becomes responsible for providing that coverage.
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Simply labeling someone as a subcontractor is not enough. Maryland will look at the actual relationship and whether the person operates independently. Check out our blog tiitled Is Your Subcontractor Truly a Subcontractor? It goes over how to determine if a subcontrator is truly a subcontractor or could be considered an employee.
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If the subcontractor gets hurt on the job and lacks coverage, your business could be held liable—even if you thought the responsibility fell on them.
To protect your business, always request a Certificate of Insurance (COI) from every subcontractor. If they claim to be exempt, ask for proof that they filed their IC-16 form.
Common Misconceptions That Can Cost You
Let’s address some common myths that can put Maryland business owners at risk:
Myth #1: “I’m the only member of my LLC, so I don’t need coverage.”
Wrong. Even if you’re the only person in the business, Maryland assumes you need coverage unless you’ve formally waived it with the IC-16.
Myth #2: “My subcontractor signed an agreement saying they’re responsible.”
That’s a good start, but it’s not enough. You need to verify their coverage with either a valid certificate of insurance (COI) or a filed Maryland workers compensation exclusion form. And to take it one step further, if your subcontractor uses a subcontractor, you will need to make sure that they all have a workers comp policy or an exclusion form on file. So you can see how it can get complicated with layers of subcontractors used for different jobs.
Myth #3: “I’m just a small business—no one’s going to check on me.”
That’s no longer true. The WCC is actively auditing businesses and issuing summons for hearings to prove compliance. We have personally seen hearing requests from our clients over the past couple of years.
What Happens at a Workers’ Compensation Commission (WCC) Hearing?
If the WCC calls your business to a hearing, it’s not just a friendly chat. You will have to take valuable time away from your business to attend the hearing.
You’ll be asked to present:
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Proof of an active workers’ compensation policy; OR
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A copy of your IC-16 exclusion form on file with the WCC.
Failure to produce either can result in an immediate fine, which as mentioned earlier, can start at $10,000 and can reach up to $25,000.
And if your business continues operating without compliance after the hearing, additional penalties may apply.
How to Stay Compliant and Avoid Fines
Let’s walk through exactly what you need to do to protect your business:
Step 1: Evaluate Your Status
Are you a business owner who actively works in your LLC? Do you have at least 20% ownership? If so, you qualify to file the exclusion form.
If you’re not sure, consult your operating agreement or an insurance professional.
Step 2: File the Maryland Workers Compensation Exclusion Form (IC-16)
You can find the form on the WCC website here. Fill it out completely and make sure you meet the ownership requirements.
Once submitted, keep a copy in your records and confirm that the WCC received and approved it.
Step 3: Review Subcontractor Coverage
For every subcontractor you hire:
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Ask for a Certificate of Insurance verifying their workers’ compensation policy.
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If they are exempt, request a copy of their filed exclusion form with the WCC.
Document these items and store them securely in case you ever face an audit or hearing.
Step 4: Maintain Accurate Records
Keep copies of:
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Your filed exclusion form;
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All certificates of insurance from subcontractors;
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Any communications with the WCC;
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Payroll or tax documentation supporting your ownership and business structure.
Being organized can save you time, money, and legal headaches later.
Contact Huff Insurance—We’ve Got Your Back
At Huff Insurance, we understand that navigating workers’ compensation requirements in Maryland can be confusing—especially for small business owners. That’s why we’re here to help.
We’ve been serving Maryland since 1960 as an independent insurance agency, which means we’re not tied to just one insurance company. We work with multiple carriers to find the coverage (or exemptions) that best fit your business.
Need help filing the exclusion form or confirming your subcontractors’ insurance status? Want to double-check that your policy meets Maryland’s standards? We’ve got your back.
Give us a call or stop by—let’s protect your business before the state comes calling.
FAQs About Maryland Workers Compensation Exclusion
Q1: Who is eligible to file an exclusion form in Maryland?
You must own at least 20% of the business and actively work for it. This includes LLC members, corporate officers, and sole proprietors.
Q2: What’s the penalty for not filing or having a workers’ comp policy?
The Maryland WCC can issue fines ranging from $10,000 to $25,000, even for small businesses. You may also be called to a hearing.
Q3: Does filing the exclusion form once cover me forever?
No. If your business structure or ownership changes, you may need to file again. It’s wise to review your status annually.
Q4: What if my subcontractor says they’re exempt but won’t show proof?
Treat it as a red flag. Without a certificate of insurance or exclusion form, you could be held liable for their coverage.
Q5: Can Huff Insurance help me with this process?
Absolutely! As independent agents, we help Maryland businesses handle everything from filing forms to finding affordable policies.