EMPLOYERS BEWARE: Unpaid Officers and Directors may count as employees under the Virginia Workers’ Compensation Act

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The Virginia Workers’ Compensation Commission (the “Commission”) has consistently held that the members of a board of directors of a corporation are counted as employees under the Virginia Workers’ Compensation Act (the “Act”) whether they are salaried or not.1 The treatment of unpaid directors as employees is important to note because the Act generally applies to employers with three or more employees regularly in service. One may assume that an “employee” is someone that receives some form of compensation for services rendered, but the Commission has not defined the term so narrowly. Although executive officers have the option of exempting themselves from the Act, this requires the filing of a formal notice with the Commission. Simply ignoring the requirements of the Act may lead to consequences.  If the Commission determines that the employer is covered under the Act, the Commission can issue a show cause order to determine if the employer should be fined for failing to carry workers’ compensation insurance. An employer’s understanding of the number of its employees therefore is of significant importance. The Act does provide certain exceptions to this rule including certain provisions related to 501(c)(3) organizations. Ultimately, a close reading of the Act coupled with a legal analysis of an employer’s circumstances is important to assessing the applicability of the Act and its insurance requirements to a particular employer.

1 See, e.g., Aguilar v. Sary Inc., 2015 WL 5462051, at *2 (Va. Workers’ Comp. Comm’n Sept. 11, 2015).

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