All three states generally require workers' compensation coverage once an employer hits a threshold — but the threshold varies significantly by state. Kentucky requires coverage with just 1 employee, Tennessee requires coverage at 5 employees for most non-construction businesses, and Virginia requires coverage once you regularly employ more than 2 employees. Understanding these differences is critical for any employer operating across state lines.
Quick Reference: Coverage Thresholds
Kentucky
Any employer with even one employee must secure coverage.
Who Counts as an Employee
Family members, temporary workers, and part-time workers all count toward the employee threshold. There are no exceptions for relatives or seasonal help.
Out-of-State Employers
If your business is based outside Kentucky but you perform any work in the state, you are required to carry Kentucky workers' compensation coverage. An "all states" endorsement alone does not satisfy this requirement — Kentucky must be specifically covered.
Premium Deductions Prohibited
Kentucky law explicitly prohibits employers from deducting workers' compensation premium costs from employee wages. The cost of coverage is entirely the employer's responsibility.
Coverage Options
Employers may secure coverage through a licensed insurance policy or through an approved self-insurance arrangement. Both options must meet state requirements.
Tennessee
Construction & coal mining: 1 employee triggers coverage.
Who Counts as an Employee
Tennessee counts minors, working family members, and part-time employees when determining the 5-employee threshold. For non-construction sole proprietorships, LLCs, and partnerships, owners are not included in the count. Corporate officers working full time are included, though they may be eligible to exclude themselves from the policy.
Construction & Mining — Stricter Rules
Construction employers with 1 or more employees must carry coverage. This includes seasonal, part-time, family-member, and as-needed workers. Coal mining employers must also secure coverage with just 1 employee. Construction owners may exempt themselves through the state's Exemption Registry, but employees must still be covered.
Independent Contractor Test
Tennessee uses a 7-factor test to determine whether a worker is truly an independent contractor or an employee. A 1099 form alone does not settle the issue — the state looks at the full working relationship. Misclassification can expose employers to significant liability.
Out-of-State Employers
Out-of-state employers with employees working in Tennessee may be subject to Tennessee law. For non-construction businesses, there can be a limited exemption when the work is temporary and the employer already has workers' comp coverage in another state.
Virginia
Coverage required once you regularly employ more than 2 workers.
Who Counts as an Employee
Virginia casts a very wide net. Part-time, seasonal, temporary workers, minors, trainees, immigrants, and working family members all count. Virginia also counts subcontractor employees when determining whether the threshold is met — if those subcontractors are assisting in the same trade, business, or occupation or helping fulfill a contract.
Contractor & Subcontractor Rules
A contractor generally must count its own employees plus subcontractor employees when determining whether coverage is required. This applies even if the subcontractor already carries its own workers' comp policy. Carriers may also charge premium for subcontractors, so contractors should keep certificates of insurance on file for all subs to protect themselves at audit.
Out-of-State Employers — No Reciprocity
Virginia requires Virginia coverage for any work performed in the state, even temporary work. Virginia does not recognize reciprocity with other states. Listing Virginia only under Item 3C of a workers' comp policy is not sufficient — Virginia generally needs to be added to Item 3A to satisfy the requirement.
Out-of-State Work: What You Need to Know
For employers operating across state lines, coverage requirements can get complicated fast. Here's a summary of how each state handles out-of-state employers:
Out-of-state employers performing any work in Kentucky must carry Kentucky workers' comp coverage. An "all states" endorsement alone does not satisfy the requirement — Kentucky must be specifically listed on the policy.
Out-of-state employers with employees working in Tennessee may be subject to Tennessee law. For non-construction businesses, a limited exemption may apply when the work is temporary and the employer already has workers' comp coverage in another state.
Virginia requires Virginia coverage for work performed in the state, even for temporary work. Virginia does not recognize reciprocity with other states. Listing Virginia only under Item 3C is not sufficient — it generally needs to be added to Item 3A of the policy.
Contractor & Subcontractor Considerations
This is one of the most important — and most overlooked — areas for contractors working across the tri-state region.
A contractor must generally count its own employees plus subcontractor employees when determining whether coverage is required — even if the subcontractor already carries its own workers' comp policy. Carriers may charge premium for subcontractors, so contractors should keep certificates of insurance on file for all subs to protect themselves at audit.
Tennessee uses a 7-factor test to determine whether a worker is truly an independent contractor or an employee. A 1099 form alone does not settle the issue. Tennessee also has special construction-service-provider rules and an Exemption Registry for eligible owners who wish to exclude themselves from coverage.
Not Sure If You're Covered?
Workers' comp requirements are complex and vary by state, industry, and workforce type. Our team specializes in multi-state coverage across Kentucky, Tennessee, Virginia, West Virginia, and Ohio.