Sole Proprietor Workers' Compensation Waiver in New York
New York law lets a sole proprietor waive coverage for themselves under workers' compensation, but the waiver does not extend to employees. If you operate as a sole proprietorship in New York, you must carry workers' compensation insurance for any hired workers, while your own coverage is optional unless you are classified as a construction worker. The election is made by filing Form C-105.1 with the New York State Workers' Compensation Board, and the waiver is specific to the proprietor, not the business entity.
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Who Can File the Waiver
The waiver applies only to the individual sole proprietor and certain partners. In New York, partners in a partnership can also elect to waive their own coverage, but they must still insure any partners who are employees or any workers they hire. Corporate officers are generally required to have coverage unless they file a specific election, which is a separate process from the sole proprietor waiver. The key distinction is that the waiver removes the requirement for the individual owner, not the obligation to cover others.
Filing Form C-105.1
To file the waiver, you submit Form C-105.1 to the Workers' Compensation Board. The form requires your business details, your classification, and a statement that you are the sole proprietor electing to waive coverage. Once filed and accepted, the waiver remains in effect unless you revoke it or the Board requires a new election. There is no state fee for filing the form, but you must maintain the waiver documentation in case of an audit or injury claim.
Why Sole Proprietors Consider the Waiver
Sole proprietors often carry very few employees, and the cost of a workers' compensation policy for just themselves can seem unnecessary if they have no staff. However, the decision should weigh the risk of a workplace injury. Without coverage, a sole proprietor injured on the job cannot claim through the workers' compensation system and must rely on personal health insurance or litigation against a third party. The waiver is a financial risk choice, not an elimination of risk.
Penalties for Non-Compliance
If you have employees and fail to carry workers' compensation insurance, New York treats this as a serious violation. Penalties include daily fines of $1,000 to $5,000, plus the stop-work order authority, which can halt business operations until coverage is obtained. The Workers' Compensation Board can also seek criminal prosecution for willful non-compliance. The waiver for the proprietor does not exempt the business from the requirement to cover employees.
Waiver vs. Coverage for Employees
The table below summarizes the core distinction between the sole proprietor waiver and employee coverage requirements in New York.
| Attribute | Sole Proprietor | Employees |
|---|---|---|
| Coverage Required? | No, can file waiver (Form C-105.1) | Yes, mandatory |
| Who Files? | Individual proprietor | Employer (the business) |
| Penalty for Non-Compliance | Waiver not filed = no direct fine for owner, but no coverage | Fines up to $5,000/day, stop-work order |
| Injury Claim Path | Personal health insurance or third-party suit | Workers' compensation claim |
Construction Workers and Special Rules
Sole proprietors classified as construction workers in New York cannot waive workers' compensation coverage. The state requires construction contractors, including sole proprietors, to carry coverage for themselves regardless of whether they have employees. This is a strict rule, and misclassification to avoid the requirement can trigger penalties. If your sole proprietorship operates in construction, you must secure a policy and cannot file Form C-105.1 for yourself.