Professional Corporations and Workers' Compensation in New Jersey

What a Professional Corporation Means for Workers' Compensation in New Jersey

A professional corporation (PC) in New Jersey is a special entity that limits liability for professional malpractice but does not alter the state's workers' compensation requirements. The New Jersey Department of Labor and Workforce Development mandates that all employers, including PCs, carry workers' compensation insurance for employees who perform any work that could lead to injury or illness.

Coverage Requirements for PCs

New Jersey law requires coverage for all employees, regardless of whether the employee is a partner, officer, or staff member. The insurance must provide medical benefits, temporary total disability, permanent partial disability, and death benefits. PCs that employ non‑professional staff, such as administrative assistants, must also insure those workers. Failure to carry required coverage can result in penalties, loss of the right to sue for wage and hours violations, and potential civil liability for the corporation and its directors.

How to Determine the Right Policy Size

PCs often have a mix of paid staff and unpaid partners. Coverage limits should reflect the number of employees and the nature of the work. For example, a PC with five full‑time attorneys and one paralegal typically purchases a policy with a $1,000,000 limit per employee and a $1,000,000 aggregate limit. The insurer will assess risk factors such as practice area, client volume, and office environment to set rates.

Claims Process for Professional Employees

When an employee reports an injury, the PC must submit a Workers' Compensation Claim Form (W-1) to the insurer within 30 days. The insurer investigates, and if the claim is accepted, pays the benefits. PCs should keep detailed incident reports and maintain accurate payroll records to support claims and defend against potential disputes. In New Jersey, the claim must be reported even if the injury occurs outside of work hours if the employee was engaged in work‑related activities.

Common Pitfalls and Compliance Tips

• Under‑insurance: PCs sometimes underestimate the required limits, especially if they have multiple offices or contractors.
• Non‑covered employees: Part‑time or contract workers may be excluded from coverage if not properly classified.
• Late reporting: Delays in filing claims can jeopardize benefits and expose the PC to penalties.

Interaction with Professional Liability Insurance

Workers' compensation and professional liability (malpractice) insurance are separate. While workers' compensation protects employees against workplace injuries, professional liability covers claims of negligence against the PC's services. PCs must manage both lines to protect the corporation's assets and reputation.

When a PC Might Be Exempt from Workers' Compensation

New Jersey law allows certain small professional corporations that employ only the owners and have no non‑owner employees to opt out of workers' compensation. However, this exemption requires a formal written statement and filing with the Department of Labor. PCs that opt out must still maintain other statutory insurance, such as unemployment insurance.

Seeking Professional Advice

Because the intersection of professional corporation status and workers' compensation can be complex, PCs should consult with an attorney or insurance broker experienced in New Jersey labor law. Regular policy reviews and audits help ensure ongoing compliance and mitigate risk.