Workers' compensation Michigan: Essential requirements for contractors

Crossing state lines to have crews across the country requires contractors to understand state-specific workers’ compensation rules. This guide details workers’ compensation in Michigan, including state coverage rules, insurance costs, and filing deadlines, helping keep contractors fully compliant.

What is workers’ compensation in Michigan?

Michigan’s Workers’ Disability Compensation Act supplies medical care and lost-wage benefits to employees who suffer from job-related injuries or illnesses. Under this no-fault structure, workers receive financial support after a jobsite injury without needing to prove their employer caused the injury. General jobsite horseplay and routine mistakes don’t prevent a worker from receiving benefits. However, employees forfeit claim eligibility if willful or intentional misconduct directly causes the injury. 

Michigan law also enforces the “exclusive remedy” rule (MCL 418.131), which makes workers’ compensation the sole legal recourse for jobsite injuries and illnesses. This protects employers from personal injury lawsuits except in rare cases of intentional harm.

Is workers’ comp required in Michigan for construction companies?

State laws across the U.S. mandate workers’ compensation coverage, except in Texas, where private employers can opt out. Construction companies meeting the following statutory thresholds must adhere to Michigan workers’ compensation requirements by securing coverage for their entire workforce, including active jobsite labor and office staff. 

Crew size and hours thresholds

Under Michigan Compiled Law (MCL 418.115), private construction firms must carry workers’ comp insurance if they:

• Regularly employ three or more workers at one time, including full-time, part-time, temporary, and seasonal staff
• Employ at least one worker for 35 or more hours per week for 13 weeks or longer during the preceding 52 weeks

Subcontractors and independent contractors

Under MCL 418.171, a principal contractor hiring an uninsured subcontractor becomes the statutory employer of that subcontractor’s workers. Consequently, the principal firm and its insurance carrier assume full financial responsibility for any work-related injuries or illness claims.

Contractors should verify coverage for every subcontractor entering a jobsite. While principal contractors retain the legal right to seek reimbursement from uninsured subcontractors, resulting injury claims still impact the principal firm’s experience modification rate (EMR), which may result in future premium increases.

Sole proprietors and family-run crews

Sole proprietors operating without employees remain exempt from mandatory coverage because business owners don’t qualify as legal employees under Michigan law. However, hiring staff that meets the statutory triggers listed above mandates purchasing a policy. 

Family-run construction businesses can exclude immediate family members, including spouses, children, and parents, from mandated coverage under specific conditions. This exclusion only applies when every employee qualifies for legal exclusion and the firm doesn’t hire subcontractors. To exclude employed family members, contractors must file Form WC-337 (Notice of Exclusion) with the Workers’ Disability Compensation Agency (WDCA) and endorse the form onto their insurance policy.

How does workers’ comp work in Michigan?

Here’s an overview of benefits under Michigan workmans’ comp laws:

• Medical benefits: Coverage begins on the date of injury and pays for reasonable and necessary treatment at the rates set by the state health care services fee schedule. The employer may select the treating physician for the first 28 days. After that, the employee may select a preferred healthcare provider.
• Wage-loss benefits: Payments replace lost income starting on the eighth day after the injury, providing 80% of the employee’s after-tax weekly earnings up to the state maximum. If the disability extends beyond 14 days, benefits apply retroactively to the first week.
• Disability benefits: Ongoing wage replacement and rehabilitation support apply when an injury impairs earning capacity. MCL 418.301(4) establishes strict criteria for determining post-injury wage earning capacity.
• Vocational rehabilitation benefits: Program funds cover the cost of training and job replacement if the worker’s injury prevents a return to their original position.
• Specific loss benefits: Fixed benefit schedules provide wage replacement for the loss of specific body parts or bodily functions under MCL 418.361.
• Death benefits: Provisions cover funeral expenses up to $6,000 and supply ongoing wage replacement to legal dependents for at least 500 weeks following fatal workplace injury. Where a dependent child is still under 21 when the 500 weeks run out, payments continue until that child turns 21.

How much does workers’ comp cost in Michigan?

Insurance carriers set workers’ compensation premiums using specific pricing factors rather than flat statutory fees. Total policy costs depend on trade risk classifications, annual payroll calculations, and an individual company’s claims history.

Trade classification and class code

Insurers assign class codes based on specific worker job functions and risk levels. Rates vary across trades. For example, a higher-risk trade like roofing commands a higher base rate per employee than lower-risk trades like painting or clerical office tasks. Misclassifying employees can trigger legal and financial penalties like steep premium adjustments and unpaid liabilities.

Payroll and subject earnings

Insurers calculate base premiums per $100 of gross eligible payroll. However, the rating manual lets employers exclude certain pay from the payroll base. The main one is overtime excess, meaning only the premium half of an overtime hour and not the whole overtime wage, along with documented employee expense reimbursements.

Claims history and experience modifier

Providers evaluate a company’s safety record through using EMR. This metric compares the employer’s claims history against companies of a similar size. Providers then adjust premiums accordingly. An EMR of 1.00 represents an average risk profile, while an EMR below 1.00 indicates a cleaner safety record and may lead to policy discounts. Conversely, an EMR above 1.00 reflects high claim frequency or severity, which can drive up premiums.

Michigan workers’ comp laws contractors should know

Failing to comply with Michigan’s reporting deadlines or mandatory coverage rules exposes contractors to severe civil penalties, operational shutdowns, and criminal liability.

Reporting and filing deadlines

Under Michigan law, statutory reporting timelines trigger immediately following a jobsite injury or claim:

• Employer injury reporting: Contractors must submit Form WC-100 (Employer’s Basic Report of Injury) to the WDCA immediately if an injury results in a specific loss, a death, or a disability extending beyond seven consecutive days.
• Employee injury notice: An injured worker must notify the employer within 90 days of an injury or illness. Missing this 90-day window doesn’t automatically bar a claim unless the employer shows the delay prejudiced its ability to investigate or defend.
• Formal claim filing: Employees have two years to file a claim, running from the later of the injury date, the date the disability becomes apparent, or the last day of employment with the employer the claim is filed against.

Disputed claims and appeals

When an employer or insurer disputes an injury claim, the injured worker can file a formal application for mediation or schedule a pre-trial hearing before a workers’ comp magistrate to resolve contested benefits.

Penalties for noncompliance

Michigan imposes several civil and criminal penalties against noncompliant businesses:

• Criminal misdemeanor (MCL 418.641): State law penalizes noncompliance as a misdemeanor offense, imposing fines of up to $1,000, imprisonment for up to six months, or both. Each day of noncompliance is a separate violation.
• Stop-work orders and daily fines (MCL 418.645): Circuit courts may bar the noncompliant contractors from employing personnel and impose civil fines of up to $1,000 for each day without coverage.
• Personal liability (MCL 418.647): Corporate officers and directors, LLC managers who are also members, and LLP partners can be held jointly and severally liable for whatever portion of an award is still unpaid after the agency has executed against the business.
• Loss of lawsuit protection (MCL 418.641(2)): Uninsured employers forfeit exclusive remedy protection, exposing the firm to civil personal injury lawsuits brought by injured workers seeking damages.

Manage Michigan workers’ comp compliance with Miter

Michigan’s workers’ compensation requirements combine distinct statutory benefit structures, rigid reporting deadlines, and steep penalties for noncompliance. Contractors operating across state borders require structured compliance systems to keep up with their obligations.

Miter Compliance tracks workers’ compensation class codes alongside job costing, so wages, taxes, and insurance land on the right job and cost code on every payroll run. For contractors working in multiple states, Miter enables multi-state tracking to support compliance across jurisdictions.

Frequently asked questions

How do contractors obtain workers’ compensation coverage in Michigan?

Contractors can purchase workers’ compensation coverage through a licensed private insurer. Eligible businesses can also apply through the WDCA for self-insurance approval or join an authorized self-insurance group.

Is self-insurance or a private policy the better option for a Michigan contractor?

Large firms with significant financial reserves and internal risk-management systems may prefer to pursue self-insurance. But smaller and medium-sized businesses might purchase a policy from a private insurance provider to avoid taking on direct financial liability for major claims.

Is MIOSHA the same as Michigan workers’ comp?

No, the Michigan Occupational Safety and Health Administration (MIOSHA) and the workers’ compensation system handle different operational functions:

• MIOSHA sets jobsite safety rules, conducts inspections, and enforces workplace safety standards. 
• The WDCA enforces workers’ compensation laws, oversees benefit payments, and resolves claim disputes.