Workers' Compensation for Contractors on Federal Property

When Federal Projects Trigger Workers' Compensation

Federal agencies require contractors to provide workers' compensation insurance for employees who work on federally owned or leased property. The rule applies regardless of the contractor's business size or whether the work is on a temporary or permanent site. The federal government is the employer of record for the purpose of the Workers' Compensation Act, and the contractor's employees are treated as federal employees for coverage purposes.

Federal Regulations that Mandate Coverage

The primary source is the Federal Acquisition Regulation (FAR) Subpart 52.204‑5, "Insurance Requirements." Section 52.204‑5.10 specifically states that the contractor must maintain workers' compensation insurance covering all employees on federal property. Failure to provide the required insurance can result in contract termination, financial penalties, or exclusion from future contracts.

How the Coverage Works in Practice

When a contractor signs a federal contract, the contract clause obligates the contractor to submit proof of workers' compensation coverage before work begins. The contractor's policy must:

• Cover all employees, independent contractors, and volunteers who perform work on the federal site.
• Provide limits that meet or exceed the federal minimums set by the Department of Labor and the specific agency's requirements.
• Include a certificate of insurance listing the federal agency as the insured party.

Once the contractor submits the certificate, the agency issues a "Certificate of Coverage" or "Workplace Injury Report" confirming that the policy is active. The contractor must keep this documentation on file and provide updates if the policy changes.

Who Is Responsible for Paying Claims?

Under federal law, the contractor remains responsible for paying any workers' compensation claims that arise from injuries sustained on federal property. The contractor's insurance carrier processes the claim and pays the employee. The federal agency does not reimburse the contractor for claim payments, although it may require a loss adjustment report to verify the claim's validity.

Special Cases and Exceptions

While the rule is broad, there are nuances:

• Subcontractors: If a contractor subcontracts work, the subcontractor must also carry workers' compensation. The primary contractor must verify this coverage before subcontracting.
• Non‑Federal Employees: Employees who are not physically present on federal property (e.g., traveling to a separate site) are not covered under the federal requirement, though they may still need state coverage.
• Temporary Work Sites: Even temporary or seasonal work on federal property triggers the same coverage obligations.

Steps to Ensure Compliance

1. Review the contract clause and identify the required insurance limits.

2. Obtain a policy from a licensed insurer that offers federal coverage.

3. Submit the certificate of insurance to the contracting officer and keep it updated.

4. Maintain records of all claims, payments, and correspondence with the insurer.

5. Conduct annual compliance audits to verify that coverage remains in force and meets federal standards.

Consequences of Non‑Compliance

Non‑compliance can lead to:

• Contract termination or suspension.
• Financial penalties or debarment from federal procurement.
• Legal liability for unpaid workers' compensation claims.

Because the federal government is a powerful buyer, contractors must prioritize maintaining valid coverage to avoid costly disruptions.

Key Takeaways

Contractors working on federal property must carry workers' compensation insurance that covers all on‑site employees. The federal government is the employer of record for coverage purposes, and the contractor remains liable for claim payments. Compliance is enforced through contract clauses, and failure to meet these requirements can result in severe penalties. By following the outlined steps and maintaining diligent records, contractors can secure their projects and protect both their workforce and their business interests.