Montana Workers Compensation: Employer Requirements

A contractor in Bozeman once asked me which of his policies would pay for a broken wrist. He had general liability, he had a health plan, and he had a signed offer letter for each of his three people. None of those pay a workers compensation claim in Montana, and the state says so in plain language: neither general liability nor health and accident insurance is a substitute.

His real problem was timing. He believed the obligation started at some employee count he had not reached yet. Montana has no such count. The duty attached the day his first employee started, and every week after that was a week the Uninsured Employers Fund could later price.

This page covers one state. How the insurance itself works, what it pays and why premiums move is covered in the guide to workers compensation insurance, and I am not going to repeat it here. What follows is the Montana rule set: the trigger, the exemptions, the three plans, the deadlines and the penalties.

Who Needs Coverage

Coverage is required from the first employee. MCA 39-71-401(1) states that the Workers' Compensation Act applies to all employers and to all employees, and that an employer with any employee in service under any appointment or contract of hire, expressed or implied, oral or written, must elect to be bound by compensation plan No. 1, 2 or 3.

There is no small employer floor to hide under. That is the single most useful thing to know about Montana, because a large share of states do set a threshold at two, three, four or five employees. The full statutory list of covered and exempt employments sits in MCA 39-71-401, and it is worth reading once in full before you decide anyone on your payroll is outside it.

The definition of employer is deliberately broad. MCA 39-71-117 reaches each person, firm, voluntary association, LLC, LLP and private corporation, and it names prime contractors explicitly. Minors count as employees, and so do workers who are not lawfully authorized to work, because MCA 39-71-118 includes aliens and minors whether lawfully or unlawfully employed.

Two provisions catch employers who think they have outsourced the problem. A temporary service contractor is the employer of a temporary worker for premium and loss experience purposes. Separately, an employer who uses a worker furnished by another company is presumed to be the employer for premium purposes unless there is substantial credible evidence that the supplying company retained control over all aspects of the work, at the start and through every phase of it.

Who Is Left Out

Montana's exemptions are a list of roles rather than a headcount rule. MCA 39-71-401(2) opens with an important qualifier: these employments are outside the Act unless the employer elects coverage for them and an insurer allows the election. Election is possible for almost every line below, and for owner operators in physically risky trades it is usually the right call.

Note the anti-avoidance rule at MCA 39-71-401(5). Appointing an employee as a corporate officer, a partner, or an LLC member or manager for the purpose of exempting that person from coverage does not entitle them to the exemption. The exemptions describe genuine ownership and genuine roles, and the department reads them that way.

Agriculture deserves its own line because so many states carve it out. Montana does not have a general farm or ranch exemption, so hired agricultural employees are covered like everyone else. Broader hiring rules for the state sit in the Montana HR compliance guide, and the pay floor those workers earn is on the Montana minimum wage page.

Where the Policy Comes From

Montana is not a monopolistic state. You can buy from a private carrier, from the Montana State Fund, or you can self-insure with the department's permission. The statute calls these compensation plans No. 2, No. 3 and No. 1, and every employer picks one of the three.

For a small business the practical choice is between the first two of those. Self-insurance under Plan No. 1 requires proof of solvency to the department and to the guaranty fund, plus a security deposit that starts at $250,000 for the first three years, which puts it out of reach for almost every employer under a few hundred people.

The Montana State Fund is what makes the market work for new and high hazard businesses. Because MCA 39-71-2313(2) obliges it to insure any employer that asks, a two person framing crew that no private carrier wants still has a place to buy. That is a guaranteed market, not a monopoly, and pricing on the private side stays competitive because of it. How the state ranks against others on this point is covered in the roundup of workers compensation requirements by state.

Whichever plan you land on, the premium is settled after the fact against actual payroll and actual job classifications. That reconciliation is the same everywhere, and what to prepare for it is in the guide to the workers compensation audit.

Contractors and the Exemption Certificate

Montana settles the contractor question with a certificate rather than a debate. Under MCA 39-71-417, a person who regularly and customarily performs services at a location other than their own fixed business location must either elect to be bound personally by a compensation plan or apply to the department for an independent contractor exemption certificate.

The certificate is sworn. The applicant swears that they have been and will continue to be free from control or direction over the performance of their own services, both under contract and in fact, and that they are engaged in an independently established trade, occupation, profession or business, with documentation to prove it. The application runs through the department's independent contractor program and carries a $125 non-refundable fee. Once issued it lasts two years unless suspended, revoked or canceled.

The penalties run both ways. A person who works as an independent contractor without a certificate or personal coverage faces department fines of up to $1,000 for a first violation, up to $2,500 for a second, up to $5,000 for a third and $5,000 for each one after that. An employer may not coerce or mislead an employee into adopting independent contractor status to dodge coverage, and may not exert so much control that the contractor is pushed out of compliance.

There is also a subcontractor trap in MCA 39-71-405. An employer who contracts with an independent contractor for work that is a regular or recurrent part of its own trade or business is liable for benefits to that contractor's employees if the contractor has not properly complied with the coverage requirements. The classification tests behind all of this are covered in the guide to what an independent contractor is.

The Sign on the Wall

Montana requires a posted sign and does not require a new hire pamphlet. MCA 39-71-401(6) directs each employer to post a sign in the workplace at the locations where notices to employees are normally posted, informing employees about the employer's current provision of workers compensation insurance.

Read the definition of workplace in that subsection carefully, because it is wider than an office. A workplace is any location where an employee performs any work-related act in the course of employment, temporary or permanent, and it includes the place of business or property of a third person while you have access to or control over it for the purpose of carrying on your usual trade. For a crew that works on client sites, the sign travels.

The sign is provided by the department and distributed through insurers or directly, which is why the state poster page tells employers to contact their workers compensation provider for the document. An employer who purposely or knowingly fails to post it is subject to a $50 fine for each citation. The wider posting stack, most of which is federal in Montana because the state has no approved OSHA plan of its own, is covered in the guide to workplace safety posters.

Nothing in the statute requires you to hand a new employee a workers compensation booklet. I still put a one page summary in the onboarding packet, because the employee side of this system has a 30 day clock that most people never hear about until they miss it.

Injury Reporting Deadlines

Two clocks run at once, and they belong to different people. The employee has 30 days to tell you and 12 months to file a written claim. You have six days from notice to get the First Report of Injury to your insurer.

The six day figure comes from the department's own First Report of Injury instructions, which tell employers to complete the form within six days after notice of every on-the-job accident, injury or occupational disease and to send the original immediately to the insurer. The same page says to send it inside the limit even if the injured worker is not available to sign, and to send it even where the employer questions whether the injury is job related.

MCA 39-71-307 is the statutory hook. An employer or insurer that refuses or neglects to submit the reports necessary for the proper filing and review of a claim is assessed a penalty of not less than $200 and not more than $500 for each offense. That is small money next to the claim itself, but a late first report is the kind of detail that colors everything an adjuster does afterward.

On the employee side, MCA 39-71-603 accepts something short of a formal notice: actual knowledge of the accident by the employer's managing agent or superintendent is equivalent to notice. If a supervisor watched it happen, the 30 day requirement is satisfied whether or not anyone filled in a form.

What Going Without Costs

An uninsured Montana employer pays the premium it avoided twice over, plus every benefit its injured worker receives. The Uninsured Employers Fund runs the enforcement, and the department staffs field auditors around the state to find employers operating without coverage.

The numbers above come from MCA 39-71-504 through 39-71-515 and from the department's Uninsured Employers Fund program page, which states the double premium rule with a $200 minimum in the same terms as the statute.

One more consequence rarely gets mentioned until it matters. In a damages action brought by an injured employee, MCA 39-71-509 strips an uninsured employer of the three classic defenses: employee negligence unless it was willful, the negligence of a fellow employee, and assumption of risk. The whole point of buying a policy is the exclusive remedy that comes with it, and an uninsured employer stands in court without it.

When Someone Gets Hurt

Work the sequence in order, and start the paperwork on day one rather than when the diagnosis firms up. Six days is not long, and the clock starts at notice, not at the point where you decide the claim is real.

Recordkeeping under federal law runs on a separate track from the state claim. Montana has no state plan, so federal OSHA rules apply directly, and the log and reporting duties are covered in the guide to OSHA requirements for employers.

The Safety Program Attached to Coverage

Montana attaches a safety program duty to every employer through the Montana Safety Culture Act. MCA 39-71-1505 requires department rules obliging each employer to run an educational-based safety program: a new employee general safety orientation, job or task specific safety training, continuous refresher training including periodic safety meetings, periodic hazard assessment with corrective actions identified, and documentation that all of it happened.

Above five employees the bar rises. An employer of more than five employees must have a comprehensive and effective safety program that includes a safety committee of employee and employer representatives holding regularly scheduled meetings, written procedures for reporting and investigating all work-related incidents, accidents, injuries and illnesses, and policies assigning specific safety responsibilities and accountability.

The safety committee piece can be waived. A Plan No. 2 or Plan No. 3 insurer may waive it where the employer presents sufficient evidence of an effective written safety plan together with a satisfactory modification factor or a low incident record. Insurers are also required to notify employers of the safety consultation services available to them, which is free help most small employers never ask for.

This is the part of the state scheme that overlaps with ordinary onboarding. The orientation, the task specific training and the documentation are all things a small team already does badly or not at all, and the guide to employee safety training covers how to build the content itself.

FirstHR is an onboarding and HR platform, not an insurer or a broker, and it does not sell coverage. What FirstHR holds is the record this scheme runs on: who started when, who acknowledged the safety orientation, who signed which policy, and which contractors have a current exemption certificate on file. Building that record for a first Montana hire starts with the guide to hiring employees in Montana.

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