Workers’ Compensation Rules for Tennessee Contractors and Small Businesses
Published September 29, 2026. Last reviewed September 29, 2026. By Ridge & Valley Editors.
Summary: In Tennessee, construction employers must carry workers’ compensation insurance once they have one employee, counting part-time, seasonal, and family-member workers. Most other employers must carry it once they have five employees. Owners can exempt themselves through the state’s Workers’ Compensation Exemption Registry, but an exemption covers only the named person and never their workers. Out-of-state contractors need a policy that lists Tennessee from their first day working here.
East Tennessee’s construction boom, from new subdivisions in Knox and Blount counties to rebuilding in the northeast after Helene, has brought a wave of small contractors, subcontractors, and crews from out of state. Workers’ compensation rules are one of the most common places these businesses get tripped up. Here is how Tennessee’s rules work, according to the Tennessee Department of Labor and Workforce Development.
Construction: coverage starts with the first employee
All employers in the construction industry, which the state calls construction service providers, must obtain workers’ compensation coverage when they have one or more employees. That includes:
- Seasonal and part-time employees.
- Family members of the business owner.
- Employees who work on an “as needed” basis.
The exemption registry covers only you
A construction business owner who meets the qualifications can apply to exempt himself or herself from coverage through the Tennessee Workers’ Compensation Exemption Registry. The state is explicit that an exemption covers only the individual listed on it. It does not cover the business as a whole, and it does not cover anyone the owner hires.
Employee or independent contractor?
Tennessee uses a multi-factor test to decide whether a worker is an employee or an independent contractor. Calling someone a “sub” on paper does not settle the question. General contractors should collect certificates of insurance, or proof of a registry exemption, from every subcontractor before work begins.
Out-of-state contractors
Construction service providers from other states working in Tennessee must maintain a workers’ compensation policy with Tennessee listed in section 3A of the policy from their first day of operation in the state. This matters in East Tennessee, where crews regularly come in from Virginia, North Carolina, Georgia, and Kentucky.
Everyone else: the five-employee rule
Employers outside the construction industry must carry workers’ compensation once they have five or more employees. When counting, include:
- Part-time employees.
- Working family members.
- Minors.
Sole proprietors, LLC members, and partners are not counted toward the five.
Common exceptions
The department lists several categories that are not required to carry coverage, including casual one-time employment, domestic servants, agricultural workers, interstate common carriers, and government entities. Out-of-state employees working in Tennessee for no more than 14 consecutive days or 25 total days in a calendar year may also be exempt if they are covered in their home state. Check the department’s full list before relying on an exception.
A quick decision table
| Your business | Coverage required when you have |
|---|---|
| Construction service provider | 1 or more employees |
| Out-of-state construction service provider working in Tennessee | A policy listing Tennessee in section 3A from day one |
| Non-construction employer | 5 or more employees |
| Owner of a construction business | Coverage on yourself unless you hold a registry exemption |
Checklist for small contractors
- Count every worker, including family and part-time help.
- If you are in construction and have anyone working for you, get a policy in place before the first job.
- If you want to exempt yourself, apply through the registry and keep a copy of the approval.
- Collect current certificates of insurance or registry exemptions from every sub, every job.
- If you work across state lines, confirm Tennessee is listed in section 3A.
Sources
- Tennessee Department of Labor and Workforce Development, Who Must Carry Insurance: Construction
- Tennessee Department of Labor and Workforce Development, Who Must Carry Insurance: Non-Construction
- Tennessee Department of Labor and Workforce Development, Workers’ Compensation Exemption Registry