Workers’ compensation isn’t just a legal box to check; it’s one of the most important ways to reduce liability and protect your business on Michigan jobsites. Whether you’re a general contractor, subcontractor, or small builder, understanding how the Workers’ Disability Compensation Act (WDCA) applies to you can save you from serious financial risk.
Below are seven key facts every Michigan builder should know about workers’ comp requirements, exclusions, and best practices for 2026 and beyond.
1) Who Must Carry Workers’ Comp in Michigan
Under the Michigan Workers’ Disability Compensation Act (MCL 418.115), you must carry workers’ compensation insurance if you:
- Regularly employ three or more workers at one time (including part-time employees), or
- Employ one or more full-time workers (35+ hours per week) for 13 weeks or longer during the past 52 weeks.
Even if your employees are temporary, part-time, or family members, you may still fall under WDCA coverage requirements.
2) Sole Proprietors Aren’t Automatically Covered, but They Can Still Trigger the Mandate
A sole proprietor isn’t considered their own employee and can’t purchase workers’ comp solely for themselves. However, once they hire others, they may be required to carry a policy, especially if they employ one full-time worker or three part-time workers.
This rule also applies to independent contractors, partnerships, and LLCs that meet the WDCA employment thresholds.
3) The WC-337 “Notice of Exclusion” Has Limits
Michigan allows certain closely held businesses to exclude specific individuals from coverage, such as officers of a corporation, LLC members, or partners, by filing Form WC-337, Notice of Exclusion.
Important details:
- The WC-337 form must be obtained directly from the Workers’ Disability Compensation Agency (it’s not downloadable online).
- It documents who is excluded, but does not eliminate your liability. An excluded person can still sue, and your contractual risk remains.
Exclusion is about documentation, not immunity.
4) General Contractors Can Be Liable for Uninsured Subs’ Injuries
If a subcontractor working under you fails to maintain required workers’ comp coverage, the liability can transfer to the general contractor. In other words, you could be responsible for medical or wage-loss benefits owed to an uninsured subcontractor’s injured employee.
That’s why most professional builders treat workers’ comp verification as part of risk management—not just compliance.
5) Always Verify Coverage Properly
Never take a subcontractor’s word (or a photocopy) as proof of insurance. Instead:
- Require a current Certificate of Insurance (COI) sent directly from the sub’s insurance carrier.
- Verify that the legal business name on the COI matches the subcontract agreement.
- Check the effective and expiration dates to ensure continuous coverage.
This simple step prevents surprise audits, protects against uncovered claims, and aligns with WDCA best practices.
6) Understand the Benefits. They Affect Your Risk
Michigan workers’ comp is a no-fault system providing wage-loss and medical benefits:
- 7-day waiting period before wage-loss benefits begin.
- If the disability lasts 14 days or more, benefits are retroactive to day 1.
- Benefits typically equal about 80% of the worker’s after-tax average weekly wage, subject to state maximums.
Knowing these costs helps you evaluate real exposure when hiring uninsured subs—or when deciding how much liability to retain.
7) “Pay-As-You-Go” Is Convenient, But Not a Loophole
Some carriers offer pay-as-you-go workers’ comp tied to real-time payroll to help with cash flow.
It’s a helpful payment method, not a coverage exception. You still need a valid, state-compliant policy to meet WDCA requirements.
Quick Checklist for Michigan Builders
- Confirm whether you meet WDCA coverage thresholds (employees and hours).
- Use WC-337 exclusions correctly—understand they don’t remove civil risk.
- Always request a COI directly from the insurer, not from your sub.
- Assume GC liability can attach if your subs are uninsured.
- Document all coverage verification steps for every subcontract.
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Sources
Michigan LEO – Employer Insurance Requirements PDF
Michigan LEO / WDCA – Employer Insurance Requirements
Michigan DIFS Bulletin 89-03 – GC Responsibility for Uninsured Subs
Compensation Advisory Organization of Michigan (CAOM) – Manual References
