A restaurant that has employees but no workers’ compensation insurance can face state fines, stop-work orders and back-premium assessments, and the owner can end up personally paying an injured worker’s medical bills and lost wages. Penalties vary by state. Texas is the main exception: most private employers there may legally opt out of workers’ comp, but they give up important legal defenses if an employee sues.
This page is for owners who let a policy lapse, are opening with a small crew, or are unsure whether part-timers, family members or so-called contract kitchen help count. Requirements are set state by state, so use this as a general overview and then check your state’s rules on pages such as restaurant workers’ comp in Georgia or restaurant workers’ comp in California.
What states can do to an uninsured restaurant
Nearly every state requires employers to carry workers’ comp once they have employees, although a few set a minimum headcount and some let owners or officers exclude themselves. When a restaurant that should be covered isn’t, the state has several tools:
- Stop-work orders — several states can order a business to cease operating until coverage is bound. For a restaurant, that means a dark dining room and lost sales on top of the penalty.
- Civil penalties — fines are often calculated per day or per employee without coverage, or as a multiple of the premium you should have paid.
- Back-premium assessments — the state or the carrier that eventually writes the policy may charge for the period you went without.
- Criminal exposure — in some states, knowingly failing to carry required coverage can be charged as a misdemeanor, and serious cases can go further.
- Uninsured employer funds — many states pay an injured worker’s benefits from a special fund and then pursue the employer to recover the full amount plus penalties.
- Business friction — landlords, franchisors, catering clients and some licensing processes ask for evidence of coverage, and a gap can stall a lease renewal or a franchise audit.
States discover uninsured employers through injury claims filed by workers, data matching against payroll and unemployment filings in some states, employee tips and compliance sweeps. A busy restaurant with steady payroll rarely stays off the radar for long.
The bigger bill: paying for a kitchen injury yourself
Workers’ comp is normally an employee’s exclusive remedy. In exchange for no-fault medical and wage benefits, the worker generally cannot sue the employer. Without a policy, that trade disappears. An injured cook can often pursue benefits through the state’s uninsured employer process and also sue the restaurant directly, and in many states an uninsured employer loses defenses such as arguing the employee was partly at fault. The owner may be on the hook for surgery, wage replacement, rehabilitation and legal fees, and if the business is thinly capitalized, plaintiffs may try to reach the owner personally.
It is also worth knowing that general liability does not fill this gap. Commercial general liability policies exclude injuries to your own employees; that job belongs to workers’ comp and the employer’s liability section that comes with it.
Texas and the nonsubscriber option
Texas lets most private employers choose not to carry workers’ comp. These employers are called nonsubscribers. It is legal, but it is not free of obligations. Nonsubscribers generally must file a notice with the Texas Department of Insurance, Division of Workers’ Compensation, and tell employees in writing that the business does not carry coverage. If an employee sues over a workplace injury, a nonsubscriber typically cannot argue that the employee was contributorily negligent, assumed the risk, or was hurt by a co-worker’s negligence.
Some Texas restaurants pair nonsubscription with a private occupational injury benefit plan; many others simply buy a standard policy because a landlord, franchisor or catering client requires it. Our Texas restaurant workers’ comp page walks through both paths.
Two ways this plays out in real restaurants
Example 1: the growing taqueria. A family-run taqueria in Georgia starts with the owners and one cook and assumes it is too small to need coverage. Over a summer it adds a dishwasher and two part-time servers and quietly crosses the state’s employee threshold. The cook slips on a wet floor by the dish pit and fractures a wrist. With no policy in force, the owners face the surgery bill, weeks of wage replacement and a state penalty, all paid from operating cash.
Example 2: the contractor label. A sushi bar in California pays two prep cooks as independent contractors. One suffers a deep knife laceration that requires tendon repair. Because the restaurant sets their schedules, supplies the knives and directs the work, the state treats them as employees. The claim runs through the state’s uninsured employer fund, the owner is billed for the benefits plus penalties, and the business may face a stop order until a policy is bound.
Mistakes that leave restaurants without coverage
- Treating line cooks, dishwashers or in-house delivery drivers as contractors when the restaurant controls their hours and duties.
- Assuming part-time, seasonal or temporary workers do not count toward a state’s employee threshold.
- Missing a cancellation notice for nonpayment or an unreturned payroll audit and discovering the lapse only after an injury.
- Excluding working owners without realizing they then have no benefits for their own burns, cuts or falls.
- Underreporting payroll to shrink the deposit premium, which produces an audit bill later and can raise questions with the carrier.
- Believing a business owner’s policy or general liability covers employee injuries — it generally does not.
- Forgetting that Ohio is a monopolistic state, where coverage is purchased through the Ohio Bureau of Workers’ Compensation rather than private carriers.
How to close the gap quickly
If you have employees and no policy, the fix is usually fast. An independent agency can take one application with your payroll by job class, owner details and any loss history, and compare workers’ comp options from multiple carriers side by side. Once a policy is bound, we can issue live certificates of insurance you can send to your landlord, franchisor or event venue. Call (866) 964-6660 to talk it through, or visit our sister site USA Workers Comp for comp-only quoting. For more on how claims work in a kitchen, read workers’ comp for restaurants: burns, cuts and slips.
Frequently asked questions
Can I buy workers’ comp after an employee is already hurt?
A new policy will not cover an injury that happened before coverage started. You should still bind coverage right away to stop penalties from growing and to protect against the next claim, and get legal advice about the existing injury.
Does general liability cover an employee injured at work?
Generally no. Commercial general liability excludes bodily injury to your own employees, which is why workers’ comp and employer’s liability exist as a separate policy.
Do family members working in my restaurant need to be covered?
It depends on the state. Some states exempt certain relatives or allow owners and officers to opt out, while others count family members like any other employee, so confirm your state’s rule before assuming an exemption.
Does opting out in Texas actually save money?
Skipping premium can look like savings, but a nonsubscriber carries the full cost of injury lawsuits without key defenses. Many Texas restaurants compare a standard policy against the nonsubscriber route before deciding.
Whether your policy lapsed or you are hiring your first employees, we can line up options from several carriers today. Get Multiple Quotes within minutes.