Workers Comp for Out-of-State Employees Working in North Carolina

An electrical contractor from Virginia wins a six-week project in Raleigh. A South Carolina restoration company sends a crew to Wilmington after a major loss. A Tennessee manufacturer hires a salesperson who works full time from a home office in Charlotte. Each employer may already carry workers compensation insurance, but each has created a North Carolina exposure that deserves a separate review.

The mistake is treating workers comp as though it follows the company everywhere without limits. Workers compensation is governed state by state. The policy must connect the employer, the employee, the work, and the correct jurisdiction when an injury occurs.

Why Out-of-State Work Creates a Different Workers Comp Question

A standard workers compensation policy is not simply a nationwide promise to cover every employee wherever the company sends them. The policy is built around specific state laws, state listings, carrier authority, payroll, job classifications, and information supplied during underwriting.

When an employee begins working in North Carolina, several questions can surface at once:

• Is North Carolina specifically listed on the policy?
• Is the work temporary, recurring, or effectively permanent?
• Did the employer know about the North Carolina work when the policy began?
• Can the insurance carrier legally provide workers comp coverage in North Carolina?
• Was the North Carolina payroll reported and classified correctly?
• Does the job contract require North Carolina coverage, specific limits, or a certificate?
• Could North Carolina and the home state both claim jurisdiction over an injury?

Start With Item 3.A: The States Specifically Insured

The workers compensation policy Information Page usually identifies the states covered under Part One in Item 3.A. When North Carolina is listed there, the policy is specifically written to apply the North Carolina workers compensation law, subject to the policy terms.

For a company that knows it will have employees working in North Carolina, adding North Carolina to Item 3.A is generally the cleanest approach. It tells the carrier about the exposure and makes the state part of the policy rather than leaving the employer to argue after an injury that a different provision should apply.

This review should happen before work starts when the employer is:

• Opening a North Carolina office, warehouse, branch, or jobsite
• Hiring an employee who will regularly work from North Carolina
• Sending crews to North Carolina under a signed contract
• Performing recurring service calls or installation work in the state
• Assigning a superintendent, salesperson, estimator, or project manager to North Carolina
• Moving from occasional visits to ongoing operations

What Item 3.C Other States Insurance Actually Does

Item 3.C, commonly called Other States Insurance, can help when an employer develops exposure in a state that was not listed in Item 3.A. It is important coverage, but it is often misunderstood.

Other States Insurance is generally designed for unexpected or newly developing operations, subject to the wording of the policy, the states shown in Item 3.C, carrier authority, and notice requirements. It is not the same as specifically listing North Carolina in Item 3.A, and it should not be treated as an indefinite workaround for a known North Carolina operation.

For example, an employer may have Item 3.C wording that broadly refers to states other than those listed in Item 3.A. That does not automatically solve every problem. The employer may still need to notify the carrier promptly when work begins in a new state. The carrier may need to endorse the policy, collect additional premium, report proof of coverage, and confirm that it can write the state.

Why relying on 3.C can go wrong

• The North Carolina job was known before the policy started.
• The employer never notified the carrier after operations began.
• The carrier is not authorized to provide workers comp in the needed state.
• The assignment became regular or permanent instead of incidental.
• The state was excluded or not included in the Other States wording.
• The payroll and class codes were never updated.
• The contract requires evidence that North Carolina is specifically covered.

Other States Insurance can be valuable. It is just not a substitute for communicating with the carrier and properly scheduling an exposure the employer already expects.

Does a Temporary North Carolina Jobsite Require Coverage?

It can. There is no universal rule that says an employee can work in North Carolina for a certain number of days without creating workers comp concerns. A two-day visit by an executive is not the same exposure as a roofing crew performing hazardous work for two weeks. A six-month construction project is different again.

The following factors should be reviewed:

• Nature of the work: construction, roofing, electrical work, restoration, manufacturing, and field service present more direct injury exposure than an occasional meeting.
• Duration: a longer assignment is more likely to look like a real North Carolina operation.
• Frequency: repeated short trips may become a regular pattern.
• Employee direction: who supervises the employee and where the work is controlled can matter.
• Hiring and employment connection: where the employee was hired and where the employment relationship is centered may affect jurisdiction.
• Contract requirements: a general contractor, property owner, municipality, or customer may require proof of coverage before allowing work.
• Policy wording: the answer still depends on the actual Information Page and endorsements.

Remote Employees Living and Working in North Carolina

A remote employee can create a North Carolina workers comp exposure even when the company has no physical office in the state. The employee’s home may be the regular work location, and injuries may arise from job duties performed there.

Remote work deserves a review when:

• The employee permanently moves to North Carolina.
• The company hires someone who already lives in North Carolina.
• The employee works primarily from a North Carolina home office.
• The employee regularly travels from North Carolina to customer sites.
• The company previously described the role as based in another state.

The employer should update payroll records, employee work locations, policy state listings, and any required state registrations. Waiting until renewal can leave months of unreported exposure.

Traveling Employees and Employees Who Cross State Lines

Some jobs are naturally mobile. Salespeople, installers, service technicians, project managers, drivers, estimators, consultants, and construction crews may work in several states during the same policy year.

For these employees, the policy review should identify:

• The employee’s primary work state
• Every state where work is expected
• Whether the travel is incidental or recurring
• Whether the employee performs physical work or only attends meetings
• How payroll will be allocated and audited
• Whether any state requires separate handling

A certificate showing an active workers comp policy does not, by itself, prove that every state exposure is correctly insured. The policy Information Page and endorsements provide the better answer.

North Carolina’s Three-Employee Rule Is Not the Whole Analysis

The North Carolina Industrial Commission’s employer guidance explains that businesses employing three or more employees generally must obtain workers compensation insurance or qualify as self-insured, subject to exceptions. The underlying exceptions are addressed in N.C.G.S. § 97-13. For contractors, the analysis can be more complicated because N.C.G.S. § 97-19 can create responsibility for certain principal contractors when a subcontractor does not carry required coverage.

Out-of-state employers should not use the three-employee threshold as the only test. A company may still need coverage because:

• The total employee count reaches the threshold even though only one or two employees enter North Carolina.
• A contract requires workers comp regardless of the statutory minimum.
• A general contractor or customer will not allow the employer on site without evidence of coverage.
• The home-state policy needs North Carolina added to respond correctly.
• The company uses uninsured subcontractors or misclassified workers.
• The carrier requires disclosure of any out-of-state operations.

Workers comp requirements, policy coverage, and contract compliance overlap, but they are not identical questions.

Can More Than One State Apply to the Same Injury?

Potentially. A claim may have connections to more than one state. The injury may happen in North Carolina while the employee was hired elsewhere, normally works elsewhere, or works for an employer headquartered elsewhere.

N.C.G.S. § 97-36 addresses certain accidents occurring outside North Carolina. It identifies connections that may support North Carolina benefits, including where the employment contract was made, where the employer’s principal place of business is located, or where the employee’s principal place of employment is located.

This does not mean an employee receives unlimited duplicate benefits. State law can coordinate or credit benefits paid elsewhere. It does mean that the employer should avoid a policy structure that assumes only one jurisdiction could ever become involved.

Common Coverage Gaps for Out-of-State Employers

1. North Carolina was never added to Item 3.A

The company knew about the North Carolina work but left the policy unchanged. An injury then forces everyone to determine whether Other States Insurance applies and whether the carrier was properly notified.

2. The employer assumes a certificate proves the state is covered

A certificate can confirm that a workers comp policy exists, but it usually does not replace the policy. It may not show all state listings, endorsements, exclusions, or conditions.

3. Payroll is reported only in the home state

North Carolina payroll may need to be assigned to the correct state and classification. If it is missed, the audit can add premium later, and the original estimate may no longer be reliable.

4. The employee’s duties changed

An employee classified for office or sales work may begin supervising construction, installing equipment, or performing field labor. The state issue and the class code issue can develop at the same time.

5. A temporary assignment quietly becomes permanent

A 30-day assignment becomes six months. The employee rents a home, continues working from North Carolina, or begins handling recurring local accounts. The policy is never updated.

6. The carrier cannot write one of the needed states

Not every carrier can provide workers comp in every jurisdiction. Some states require special handling, and monopolistic state fund arrangements may require separate coverage rather than a normal private-carrier policy.

7. Subcontractors are treated as automatically independent

A 1099 form or subcontract agreement does not automatically settle workers comp status. The actual working relationship, state law, and contract structure still matter.

What Employers Should Do Before Sending Employees to North Carolina

What Documents Should Be Reviewed?

A useful multistate workers comp review should include more than the certificate. Gather:

• The current workers compensation policy Information Page
• All workers comp endorsements
• The most recent audit
• Current payroll by employee, state, and job duty
• A list of employee home and regular work locations
• Contracts for North Carolina jobs
• Certificates requested by customers or general contractors
• Subcontractor agreements and certificates
• Any notice sent to the carrier about new states or remote employees

The goal is not just to find an active policy. The goal is to confirm that the policy matches how the company actually operates.

How Multistate Exposure Can Affect Premium and Audit

Adding North Carolina exposure can affect premium because workers compensation rates and classifications are state specific. The same employee may produce different premium depending on the state, class code, payroll allocation, experience rating, carrier, and assigned-risk or voluntary market structure.

Common pricing factors include:

• North Carolina payroll
• Employee duties and class codes
• Construction or field exposure
• Claims history
• Experience modification
• Number of states
• Carrier appetite and licensing
• Use of subcontractors
• Contract requirements
• Whether the change occurs midterm or at renewal

A midterm endorsement may create additional premium immediately or at audit. That is usually preferable to discovering after an injury that the employee was working in a state the carrier never evaluated.

A Practical Multistate Example

When Should an Employer Request a Review?

Review the policy before:

• Signing a North Carolina contract
• Sending a crew to a North Carolina jobsite
• Hiring a North Carolina remote employee
• Opening a branch or warehouse
• Moving an employee into North Carolina
• Expanding recurring service territory
• Issuing a certificate for a North Carolina customer
• Renewal or final audit
• Allowing a temporary assignment to continue longer than planned

Once an injury happens, the employer has far fewer clean options. The carrier, claim adjuster, employer, employee, and state agencies may all have to work through questions that could have been resolved with one endorsement before the project started.

About Stephen Ellias

Stephen Ellias is the founder of Carolina Risk Partners, an independent commercial insurance agency based in Wake Forest, North Carolina. He helps contractors and business owners review workers compensation, general liability, commercial auto, equipment, umbrella, and contract-driven coverage needs. North Carolina insurance license 20374030.

This article provides general insurance information and is not legal advice, a coverage determination, or a substitute for reviewing your policy and applicable state law. Workers compensation requirements and claim jurisdiction depend on the facts, policy language, endorsements, carrier authority, and law in effect at the time. Coverage is subject to underwriting and the terms, conditions, exclusions, and endorsements of the issued policy.