The fact is that this question is more complicated than it seems at first glance. For purposes of determining the employee count, most state laws also count uncompensated officers as well as employees of subcontractors. In addition, state laws count the total number of employees during an entire year, and not the average number of employees at any given time.
If an employer is required to carry Workers’ Compensation but does not do so, the injured worker can file his Workers’ Compensation claim with the state’s Uninsured Employer’s Fund and will get paid the traditional benefits. The state’s Uninsured Employer’s Fund will then file a lien against the non-complying employer for the amount of the payout and can levy substantial fines against the employer in addition to the benefits.
The next question most of my clients then ask me is “Can’t I file the claim under my General Liability policy?” The answer to this is very simple: No, because these types of claims are excluded.