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Do farming operations need to carry workers compensation?

Farming operations have typically been run by families. Families are considered exempt from the workers compensation law. Meaning the farm doesn’t have to carry workers compensation on dad, mom, brother, sister, grandma, and grandpa.

If dad hires a neighbor boy to help milk cows, does the farm need to carry workers compensation on the neighbor boy? The answer could be yes or no. A few more questions need to be addressed.

How does the farm pay the neighbor boy?

Maybe the farm chops silage for the neighbor boy in exchange for milking the cows. In this case, workers compensation is not needed since it is exchange labor.

Maybe the farm pays the neighbor boy $20 each time. Workers compensation is recommended, but may not be required. Read on…

How much did the farm pay in payroll last year?

If the farm paid over $2,500 in payroll the previous calendar year, the farm needs to have a workers compensation policy to cover their paid labor.

How much does the farm pay the neighbor boy on an annual basis?

The amount of payroll and the type of work is important when figuring the cost of workers compensation. Different rates will apply for different work. If the neighbor boy helps with livestock, he will be charged a higher rate than if he is completing field work. To manage workers compensation cost, it is best to keep track of payroll by each type of work. If  records aren’t kept, all the payroll will be subject to the highest rate.

What if the farm entity is not family?

Partners and members of limited liability companies can choose to include or exclude themselves from workers compensation. Workers compensation is another cost to the farming operation. But before a decision is made to exclude workers compensation coverage, consider  the benefits of workers compensation. Farm owners/operators are the livelihood of the farming operation.





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The benefits of Workers Compensation

Workers compensation provides medical, income, death, and rehabilitation benefits for a job related injury or illness. The employee gives up the right to sue the employer in exchange for these benefits.

If workers compensation is not provided, the employee has to sue the employer for coverage. The employer has to be found negligent for his liability insurance to pay.

If a farmhand slips when climbing out of a tractor and tears a ligament in his knee, is the farmer negligent? Did the farmer maintain a safe work environment?

These questions are tricky to answer. Many times the employee feels the employer should pay for the injury or illness and the employer wants to provide coverage. Workers compensation coverage is a great answer because the policy will provide coverage regardless of fault. No tricky questions and uncomfortable situations.

More details on workers compensation benefits are provided below.

Unlimited Medical Benefits

If a farmhand slips when climbing out of a tractor and tears a ligament in his knee, workers compensation will pay for medical expenses for doctor visits, exams, and surgery.

Income Benefits

If the farmhand is unable to work for a period of time or is unable to do all work, workers compensation would pay an income benefit. The income benefit is up to 80% of spendable earnings, but cannot be more than 66 2/3% of average weekly earnings subject to maximum and minimum weekly limits.

The farmhand could end up with a total or a partial disability. If the farmhand could not perform any work, this is a total disability. A partial disability would be if the farmhand returns to work and is able to do some work. In this case, the disability income would provide coverage for the % of earnings lost due to a reduced income.

Death Benefits

If a death results from a job related injury or illness, $7,500 of burial allowance is provided to the surviving family member.

Rehabilitation Benefits 

If the farmhand needed physical therapy after surgery, workers compensation would provide coverage. Coverage also extends to any devices needed, such as a wheelchair.