What Happens If Your Small Biz Doesn’t Have Workers’ Comp?

Small business owners, independent contractors, and sole proprietors across Canada are typically required by law to register with their provincial workers’ compensation board. 

Failing to register your company and going without workers’ comp insurance can lead to significant financial and legal consequences.

Business owners need to understand that a typical liability insurance policy does not cover the cost of injuries to employees in the workplace or on the job.

Although employers’ liability insurance can complement workers’ comp coverage by protecting business owners against lawsuits and claims arising from work-related injuries and illnesses, owners must understand workers’ comp. This article outlines what can happen to a business owner who neglects to register for workers’ comp.

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What Is Workers’ Compensation Insurance?

Workers’ compensation, often called workers’ comp, is a mandatory, government-administered insurance. It is regulated by the province where you operate or live, and is administered by the Workplace Safety and Insurance Board (WSIB).

The purpose of workers’ comp is to offer benefits to injured employees. That includes coverage for lost income, medical expenses and rehabilitation, as well as resources for employers to help prevent workplace injuries.  

What Small Businesses Need to Have Workers’ Compensation Insurance?

In almost every province, businesses with employees must register with their provincial Workers’ Compensation Board and pay premiums.

Although there may be some exemptions, a business or employer cannot opt out of workers’ comp. Even independent contractors, sole proprietors, and small businesses without employees are generally required to have workers’ comp. 

It’s not uncommon for a business owner to think general liability insurance covers employee injuries, but that is incorrect. General liability insurance covers bodily injury and property damage to third parties (such as your customers).

What Are the Risks of Not Having Workers’ Comp Coverage?

If a small business in Canada is required to register for workers’ comp and doesn’t, it’s taking on a lot more risk than facing a small fine. Here are the risks a business owner potentially faces:

It’s Illegal

If you don’t register your business with your provincial workers’ comp board when you’re supposed to, you can be charged, as ‘failing to register’ is an offence. If convicted, a business owner may face fines of up to $25,000 and up to six months in jail. For corporations, the penalties can reach $500,000.

There Are Retroactive Penalties

If your business did not register with its provincial workers’ comp board and it’s discovered, the provincial board can impose retroactive premiums on your company as far back as when you first hired workers.

Furthermore, a provincial WCB can add non-compliance interest and charges that you will have to pay for failing to register and not reporting premiums to it.

You May Have to Pay for Workers’ Injuries Yourself

If you have injured workers who are entitled to workers’ comp benefits and you never registered your company, you will have to pay those benefits yourself. Also, you will be required to pay any unpaid premiums owed to the provincial workers’ comp board.

Your Business Is Exposed to Lawsuits

If you don’t register your business with the workers’ comp board in your province, you could be exposed to being sued directly by an injured worker for lost wages and medical and rehabilitation expenses.

It Can Cost You Business Opportunities

Not registering your business with your provincial workers’ comp board may cost you future opportunities. Many of your customers and public sector agencies may demand to see your company’s workers’ comp certificate. If you are not registered, you can’t win those contracts.

Frequently Asked Questions About Workers’ Comp in Canada

Does my small business need workers’ comp if I only have one employee?

In many provinces, yes, even hiring one employee can trigger the requirement to register for workers’ comp. Don’t assume your small business is exempt, as penalties for failing to register can cost significantly more than workers’ comp premiums. Contact your provincial Workers’ Compensation Board if you have questions about workers’ comp.

Does a business with remote work employees need workers’ comp?

In general, yes. If your company’s employees work remotely rather than in your office or workspace, your company needs workers’ comp to cover any injuries they sustain while performing work for your business. Similarly, work-from-home injuries to employees may be covered by workers’ comp if they occur in the course of their employment.

What liability insurance protects employers if an injured worker sues them?

Employers’ liability insurance covers claims or lawsuits a business owner may face from employees or their families for an employee’s work-related injury, illness, or death. It also covers employee injury claims denied by workers’ comp, and employees who are not eligible for workers’ comp if they are hurt on the job, such as part-time or contract employees.  

How to Get Low-Cost Liability Insurance Online to Protect Your Small Business

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Complete our online application now for a free quote in under five minutes.

Our team of brokers will shop our partner network of over 50 insurers to find the right policy for your business and budget, answer your questions, and issue the policy documents and a certificate of insurance within 48 hours or less.