Quick answer: Workers' comp is mandatory for most employers in North Dakota and Minnesota. Here's what it covers, how it works in each state, and how to make sure your policy fits your actual payroll and operations.
Workers' compensation is not optional for most employers in North Dakota and Minnesota, it's a legal requirement, and the consequences of operating without it range from fines to personal liability for employee injury costs. But beyond compliance, workers' comp is a policy where the details matter. How it is structured, how premium is calculated, and who administers it differ between the two states, and understanding those differences is worth your time as an employer.
How North Dakota Workers' Comp Works
North Dakota operates one of the few remaining state-monopoly workers' compensation systems in the country. All ND employers are required to purchase workers' comp through WSI, Workforce Safety & Insurance, the state fund. There is no private market alternative. You cannot shop your North Dakota workers' comp to multiple carriers, and no broker can place it elsewhere.
This creates a simplified administrative situation in some ways, there's one place to buy and one place to file claims. The focus shifts to making sure your payroll is classified correctly.
If you're operating in Minnesota but not North Dakota, you have access to the private market, which creates more flexibility. If your business straddles both states, employees working in both ND and MN, you may need coverage in both states, and the administration gets more complex.
How Minnesota Workers' Comp Works
Minnesota workers' compensation is written by private insurers rather than a state fund.
Minnesota requires most employers to carry workers' comp if they have at least one employee. Exceptions exist for sole proprietors with no employees, certain agricultural operations, and a handful of other specific categories, but if you have employees, assume you're required to carry it.
The basic coverage structure is the same as North Dakota: medical expenses for work-related injuries and illnesses, and a portion of lost wages while the employee recovers (typically 2/3 of their average weekly wage, subject to state maximum amounts).
What Workers' Comp Covers
Workers' compensation covers your employees when they're injured or become ill as a direct result of their work. Covered events include:
- Acute injuries from accidents (falls, equipment injuries, vehicle accidents during work tasks)
- Repetitive stress injuries (carpal tunnel from keyboard use, back injuries from repeated lifting)
- Occupational illnesses (respiratory conditions from workplace exposure)
- Injuries that occur on the way to or from a work-related task (the "coming and going" rule has nuances, consult your advisor)
The policy pays medical treatment costs without a deductible for the employee, and it pays a portion of their wages during the recovery period. In exchange, the worker generally cannot sue your business for additional damages, the workers' comp system is designed to be the exclusive remedy for work-related injuries.
Employer's liability coverage responds to certain lawsuits that fall outside the exclusive remedy protections. In Minnesota it is Part Two of the standard workers' comp policy. In North Dakota it is not: WSI's own employer guide states that employers' liability (Part Two) coverage is not available from WSI because it is a monopolistic state fund, so a North Dakota employer who wants this protection arranges it separately, usually as what is called stop-gap coverage.
How Premiums Are Calculated
Workers' comp premium is built from payroll and a classification rate, adjusted for claims history where an experience rating applies. In Minnesota the formula is payroll × classification rate × experience modifier. In North Dakota, WSI calculates premium from payroll and the rate for each class of work, and applies experience rating to accounts that qualify.
Payroll is the base, the more people you pay, the more premium you pay. Insurers and WSI use your annual payroll as the exposure base.
Classification codes assign each type of job to a category with a specific rate. Different jobs carry different rates. Each classification reflects the historical injury frequency and severity for that type of work. Using the wrong classification, whether higher or lower than your actual operations, means the wrong premium and exposure at audit.
Experience modifier (e-mod) is a multiplier based on your claims history relative to other businesses in your class. A modifier of 1.0 means average claims experience for the class, above 1.0 raises the premium, and below 1.0 lowers it.
Common Classification Errors
Payroll classification is where workers' comp premium is set. These are the errors worth checking:
Clerical employees classified under operational codes: If your office manager is classified under the same code as your field crew, that payroll is rated at the wrong rate.
Owners or executives included at full payroll: Many states allow business owners to exclude themselves from workers' comp, or to include themselves at a capped executive payroll amount (not their full salary). Confirm with your advisor whether you have the option to exclude or cap your own payroll.
Incorrect primary classification for your business: Sometimes a business gets assigned a classification based on an assumption about operations, not what the business actually does. A review of your classification codes is a standard part of a commercial program review.
Subcontractors treated as employees: If you use subcontractors who carry their own workers' comp coverage, you should be able to exclude their payroll from your audit base. Failure to get certificates of insurance from subcontractors can result in their payroll being added to your workers' comp premium at audit.
The Relationship Between Workers' Comp and General Liability
Workers' comp and GL work alongside each other but cover different scenarios. Workers' comp covers employee injuries. GL covers third-party injuries (clients, customers, visitors). They're complements, not alternatives.
One area of potential confusion: if an employee is injured while working at a client's location, the employee files for workers' comp benefits. But the client may also have a claim, for example, if they allege your employee's injury was caused by a hazardous condition your business was responsible for. That third-party claim goes to your GL policy.
Make sure both policies are in place if you have employees who work at client locations. Either gap creates exposure.
Audit Risk and How to Manage It
Most workers' comp is subject to a payroll audit. At the end of the policy year, the insurer (or WSI, in North Dakota) reviews your actual payroll to compare it against the estimated payroll used to set your initial premium. If your actual payroll was higher, you owe the difference. If it was lower, you receive a credit.
A business that grows during a policy year can owe more at audit, because the policy was priced on projected payroll that didn't keep up with actual growth. The risk management approach: update your payroll estimates with your advisor when headcount or wages change materially during the year, rather than waiting for the audit surprise.
If you have questions about your workers' comp classification, your North Dakota WSI account, or your Minnesota workers' comp renewal, that's exactly the type of review worth scheduling. Visit business insurance coverage to understand the full commercial program context, or schedule a conversation to look at your specific situation.
Kain Carlson is a licensed insurance agent in Fargo, ND, licensed in North Dakota and Minnesota, working across business, employee benefits, and personal coverage so the whole picture has one reader. Book thirty minutes to go through how your own coverage fits together.