LLC Managers vs. LLC Members and Exclusions from Workers Compensation
Virginia law is somewhat unclear on the difference between LLC Managers vs. LLC Members with regards to whether or not one must be counted as an “employee” for the calculation to determine if a business must get workers’ compensation coverage.
The Definition of LLC Managers vs. LLC Members
According to Virginia law, only executive officers can file a rejection of coverage. Virginia’s definition of an executive officer is:
“Executive officer: means (i) the president, vice-president, secretary, treasurer or other officer, elected or appointed in accordance with the charter and bylaws of a corporation and (ii) the managers elected or appointed in accordance with the articles of organization or operating agreement of a limited liability company. However, such term does not include noncompensated officers of corporations exempt from taxation pursuant to § 501(c)(3) of Title 26 of the United States Code (Internal Revenue Code of 1954).”
Therefore, only LLC Managers who have been “elected or appointed in accordance with the articles of organization or operating agreement of a limited liability company” are eligible to file a rejection of coverage.
However; other LLC Members may or may not be considered employees. For example, dormant LLC Members who solely perform their membership duties are not counted as an employee for the calculation, nor are they covered by the workers’ compensation policy (unless they elect to be). However, a careful evaluation must be made to determine if the member is performing work and earning wages distinct from LLC duties. In this instance, the LLC member is considered an employee and thus counts towards the calculation AND is required to be covered under the policy.
We hope this clarification is helpful to you! Contact us to begin setting up your policy today.
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