A South Carolina workers comp exemption lets certain business owners legally go without workers’ compensation coverage on themselves — typically sole proprietors, partners, LLC members and corporate officers — while the law still requires coverage for employees once a business has 4 (an employer must have coverage once it regularly employs 4 or more employees in the same business within South Carolina.
An employer whose total payroll in the previous calendar year was under 3000 is also exempt, no matter how many people it employed. Source: S.C. Code §42-1-360) or more. This guide explains who qualifies for the South Carolina workers comp exemption, the exact form, where to file it, what it costs, and what an exempt owner gives up. Verified against South Carolina sources as of October 2026.
South Carolina at a Glance
| Coverage required at | 4 (an employer must have coverage once it regularly employs 4 or more employees in the same business within South Carolina. An employer whose total payroll in the previous calendar year was under 3000 is also exempt, no matter how many people it employed. Source: S.C. Code §42-1-360) employee(s) |
| Exemption form | Form 5, “Corporate Officer Notice to Reject” (for corporate officers). Sole proprietors, partners and LLC members are excluded by default and file no form to stay out. To choose coverage, they notify the insurer. An employer that voluntarily bought coverage or is no longer subject to the Act withdraws by filing Form 38 with the Commission. |
| Filed with | Form 5 is filed with the employer’s workers’ comp insurance carrier, not with the SC Workers’ Compensation Commission, and a copy goes to the employer. Form 38 is filed with the Commission. Forms are available at https://www.wcc.sc.gov/forms |
| Filing fee | $0 (Form 5 has no filing fee) |
| Penalty for being uninsured | Under S.C. Code §42-5-40, an employer that refuses or neglects to get required coverage faces a fine of 1 per employee, with a minimum of 10 and a maximum of 100 for each day the failure continues. While uninsured, the employer is also liable to an injured employee either for workers’ comp benefits or in a lawsuit for damages. The SC Uninsured Employers’ Fund (§42-7-200) may pay claims against uninsured employers. |
In This South Carolina Guide:
Who Qualifies for A South Carolina Workers Comp Exemption
South Carolina limits the election to owners with a real stake in the business; the table below lists the classes and any ownership-percentage or officer-count limit.
Under S.C. Code §42-1-130, a corporate executive officer counts as an employee and is covered automatically. The officer may reject the Act by completing and filing Form 5, “Corporate Officer Notice to Reject,” with the employer’s insurance carrier, not with the Commission. The form must be notarized.
The officer must also give a copy of Form 5 to the employer or its agent, either in person or by registered or certified mail. The rejection takes effect on the date listed on Form 5, and no earlier than the day after the officer signs it.
Under §42-1-520, an officer who rejects coverage must sue the employer at common law, and the employer may then use the defenses of contributory negligence, fellow-servant negligence and assumption of risk.
Under S.C. Code §42-1-130, partners and sole proprietors are not employees by default, and LLC members are treated the same way as partners. They may choose to be covered under the business’s policy if they are actively engaged in running the business and notify the insurer. Once they choose coverage, they receive employee benefits and take on employee responsibilities. No state exemption form is required to stay excluded.
How to File the South Carolina Workers Comp Exemption
The form is Form 5, “Corporate Officer Notice to Reject” (for corporate officers). Sole proprietors, partners and LLC members are excluded by default and file no form to stay out. To choose coverage, they notify the insurer. An employer that voluntarily bought coverage or is no longer subject to the Act withdraws by filing Form 38 with the Commission..
It is filed with Form 5 is filed with the employer’s workers’ comp insurance carrier, not with the SC Workers’ Compensation Commission, and a copy goes to the employer. Form 38 is filed with the Commission. Forms are available at https://www.wcc.sc.gov/forms. The fee is $0 (Form 5 has no filing fee).
Filing on the state’s own site costs nothing beyond any statutory fee — the “exemption filing services” that advertise on this search charge for the same form.
South Carolina Workers Comp Exemption Rules at a Glance
The exact South Carolina workers comp exemption rules every owner should check before deciding to go without coverage:
| Employee threshold | 4 (an employer must have coverage once it regularly employs 4 or more employees in the same business within South Carolina. An employer whose total payroll in the previous calendar year was under 3000 is also exempt, no matter how many people it employed. Source: S.C. Code §42-1-360) |
| Corporate officers | Under S.C. Code §42-1-130, a corporate executive officer counts as an employee and is covered automatically. The officer may reject the Act by completing and filing Form 5, “Corporate Officer Notice to Reject,” with the employer’s insurance carrier, not with the Commission. The form must be notarized. The officer must also give a copy of Form 5 to the employer or its agent, either in person or by registered or certified mail. The rejection takes effect on the date listed on Form 5, and no earlier than the day after the officer signs it. Under §42-1-520, an officer who rejects coverage must sue the employer at common law, and the employer may then use the defenses of contributory negligence, fellow-servant negligence and assumption of risk. |
| LLC members and partners | Under S.C. Code §42-1-130, partners and sole proprietors are not employees by default, and LLC members are treated the same way as partners. They may choose to be covered under the business’s policy if they are actively engaged in running the business and notify the insurer. Once they choose coverage, they receive employee benefits and take on employee responsibilities. No state exemption form is required to stay excluded. |
| Workers exempt by law | Exempt under S.C. Code §42-1-360: (1) casual employees, meaning work that is both casual and outside the employer’s regular trade or business; (2) employers that regularly employ fewer than 4 people, or had a total payroll under 3000 in the previous calendar year; (3) agricultural employees, unless the employer voluntarily elects coverage; (4) people who sell a producer’s agricultural products for a commission or other pay from that producer; (5) licensed real estate salespeople who work for a licensed broker on straight commission and have signed a valid independent contractor agreement. Other §42-1-360 categories (railroad, federal and certain other workers) appear in the statute but were not verified line by line here. Genuine independent contractors are not employees under §42-1-130. A general contractor can still be the “statutory employer” of an uninsured subcontractor’s workers under §42-1-400. |
| Form | Form 5, “Corporate Officer Notice to Reject” (for corporate officers). Sole proprietors, partners and LLC members are excluded by default and file no form to stay out. To choose coverage, they notify the insurer. An employer that voluntarily bought coverage or is no longer subject to the Act withdraws by filing Form 38 with the Commission. |
| Where to file | Form 5 is filed with the employer’s workers’ comp insurance carrier, not with the SC Workers’ Compensation Commission, and a copy goes to the employer. Form 38 is filed with the Commission. Forms are available at https://www.wcc.sc.gov/forms |
| Fee | $0 (Form 5 has no filing fee) |
| Proof of exemption or coverage | A certificate of insurance from the carrier proves coverage. Anyone can check coverage for free by business name or FEIN with the Commission’s online “Verify Coverage” tool, which uses NCCI Proof of Coverage data and is linked from wcc.sc.gov. NCCI’s Proof of Coverage Inquiry (ncci.com) also works. An officer’s exclusion is shown by a copy of the filed Form 5. Contact for coverage questions: Commission Coverage Division, 803-737-6203, [email protected]. |
What A South Carolina Workers Comp Exemption Gives Up
An owner who is excluded or has rejected coverage gets no workers’ comp benefits from the policy if injured on the job. Under §42-1-520, a corporate officer who rejects coverage can only sue at common law, and the employer may use the defenses of contributory negligence, fellow-servant negligence and assumption of risk. Confirm the details with the Commission and a licensed attorney.
One honest paragraph on the “ghost policy”: a minimum-premium policy with no employees sold to owners who need a certificate of insurance. It is legal in many states, but it is not a South Carolina workers comp exemption — it is coverage with nobody on it. If you add a worker, it must be reported, or the audit will find them.
Workers Exempt by Law in South Carolina
Exempt under S.C.
Code §42-1-360: (1) casual employees, meaning work that is both casual and outside the employer’s regular trade or business; (2) employers that regularly employ fewer than 4 people, or had a total payroll under 3000 in the previous calendar year; (3) agricultural employees, unless the employer voluntarily elects coverage; (4) people who sell a producer’s agricultural products for a commission or other pay from that producer;
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(5) licensed real estate salespeople who work for a licensed broker on straight commission and have signed a valid independent contractor agreement.
Other §42-1-360 categories (railroad, federal and certain other workers) appear in the statute but were not verified line by line here. Genuine independent contractors are not employees under §42-1-130. A general contractor can still be the “statutory employer” of an uninsured subcontractor’s workers under §42-1-400.
Proving A South Carolina Workers Comp Exemption or Coverage
A certificate of insurance from the carrier proves coverage. Anyone can check coverage for free by business name or FEIN with the Commission’s online “Verify Coverage” tool, which uses NCCI Proof of Coverage data and is linked from wcc.sc.gov. NCCI’s Proof of Coverage Inquiry (ncci.com) also works. An officer’s exclusion is shown by a copy of the filed Form 5. Contact for coverage questions: Commission Coverage Division, 803-737-6203, [email protected].
Why the South Carolina Workers Comp Exemption Matters
The South Carolina workers comp exemption is a trade: lower cost today against no safety net if you are hurt. The second half of the trade is the one the search results never lead with. (1) The payroll exemption is separate from the headcount rule. An employer with total payroll under 3000 in the previous calendar year is exempt even if it had 4 or more workers.
(2) An employer that was exempt but voluntarily bought coverage stays subject to the Act until it files Form 38 to withdraw. The Commission must then tell the employer in writing to notify its employees of the withdrawal. (3) Under §42-1-400, a general contractor may be the statutory employer of an uninsured subcontractor’s injured worker, which is why contractors ask subs for certificates.
Confirm all rules with the SC Workers’ Compensation Commission and a licensed attorney. If the South Carolina workers comp exemption rules above leave any doubt about whether a worker counts, ask the state agency before you decide — the answer is free, and the penalty for guessing wrong is not.
Employer side: the South Carolina requirements guide covers the threshold, who counts and the penalties in full. Hurt while exempt? You may still have a claim against a third party — a licensed attorney can say.
Frequently Asked Questions
Who can file a workers comp exemption in South Carolina?
Typically owners with a real stake — sole proprietors, partners, LLC members and qualifying corporate officers — not employees. See the table for South Carolina’s rule.
What form is the South Carolina workers comp exemption?
Form 5, “Corporate Officer Notice to Reject” (for corporate officers). Sole proprietors, partners and LLC members are excluded by default and file no form to stay out. To choose coverage, they notify the insurer. An employer that voluntarily bought coverage or is no longer subject to the Act withdraws by filing Form 38 with the Commission.. File it on the state’s own site; filing services charge for the same form.
Can an exempt owner in South Carolina still collect benefits if hurt?
No. An exemption removes the owner from coverage, so there is no claim for medical care or lost wages. That is the trade.
Official South Carolina Sources & Resources
- South Carolina South Carolina Workers’ Compensation Commission: https://www.wcc.sc.gov
- South Carolina Workers’ Comp Statute: https://www.scstatehouse.gov/code/t42c001.php
- U.S. Department of Labor — Workers’ Comp: dol.gov
- Insurance Information Institute: iii.org
This South Carolina workers comp exemption guide was last verified against official South Carolina sources in October 2026. Rules change — confirm the current figure with the state agency or a licensed attorney.
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Disclaimer: This guide is informational only and is not legal, medical, or financial advice. Workers Comp Explained is an independent educational resource, not a law firm or insurer. Workers’ comp benefits, settlement values, deadlines, and requirements vary by state and by the specific facts of your injury and change over time, and any settlement figures here are illustrative only.
Confirm your rights and any deadline with your state’s workers’ compensation board and a licensed attorney before you act.