Workers’ Compensation for houses of worship and nonprofit organizations
Faith-based organizations are unique, but are still subject to employment law and workers’ comp mandates.
Nonprofits and faith-based organizations, while distinct in their missions, are still workplaces that must adhere to employment laws. These organizations may not always be fully informed about workers’ compensation laws, regulations, and insurance requirements. However, as the saying goes, “Ignorance of the law is no excuse.”
By law, nonprofits and houses of worship are subject to workers’ compensation mandates. There is no exemption for religious organizations, and compliance is required in 49 states. Although workers’ compensation applies to employees, determining employee status can be complex. Some organizations may inadvertently misclassify employees as contractors, which could result in violations of both employment classification and workers’ compensation laws.
Noncompliance with workers’ compensation law can result in significant penalties, including fines of up to thousands of dollars per day.
While many organizations start out with a knowledge deficit, workers’ compensation – as a whole – is not complex and provides many benefits to employers and those they supervise.
Overview of Workers’ Compensation for Churches and Faith-Based Organizations
Workers’ compensation for contractors vs. employees
Workers are designated as contractors for many reasons – some legal and some not. This factor ties into workers’ compensation law because misclassifying employees as contractors deprives them of mandatory coverage. Correctly classifying employees is a serious matter. Employers’ failure to do so can result in exorbitant daily fines and even jail time.
In addition, payroll services provider ADP reports that misclassification can result in:
Wage law violations
Unpaid employment taxes
I-9 violations
Unemployment insurance shortfalls
Unpaid workers' compensation premiums
Improper employee exclusion from benefits
Anti-discrimination violations
Failure to provide job-protected leave
Failure to provide the required employment notices
“The form used to report wages has no bearing on the church’s responsibility to provide workers’ compensation insurance.”
GuideOne, a workers’ compensation insurer for faith-based organizations, continues: “Whether an employer is responsible for workers’ compensation insurance is based on the degree of the employer/employee relationship. If an employer/employee relationship exists, then the employer is responsible for workers’ compensation insurance. If a relationship does not exist, as with an independent contractor, then the employer may not be responsible for workers’ compensation insurance.”
OVERVIEW OF WORKERS’ COMPENSATION
🏥 Workers' Compensation Basics A state-mandated insurance system that guarantees medical care and compensation for employees injured on the job, operating on a no-fault principle.
📋 Coverage Requirements All employees, including part-time and seasonal workers, must be covered, with specific nuances around independent contractors and volunteers.
⏰ Claim Reporting Prompt reporting is crucial – claims reported within the first week are significantly less expensive and easier to manage.
🔄 Return-to-Work Program Developing a structured program that helps injured employees return to work quickly reduces recovery time, maintains morale, and minimizes compensation costs.
🚨 Legal Compliance No religious exemption exists for workers' compensation, and non-compliance can result in substantial fines (potentially up to $10,000 per day).
👥 Responsibility Assignment Typically, the HR function or person responsible for employee benefits should manage workers' compensation processes.
🛡️ Employer Protections Workers' compensation is the official and sole remedy for on-the-job injuries, preventing employees from suing for workplace injuries except in cases of gross negligence.
📊 Cost Management Employers can control costs through workplace safety programs, prompt claim reporting, and effective return-to-work strategies.
