Hawaiʻi Employer’s Guide to Navigating Workers’ Compensation Claims

Misclassifying employees as independent contractors can result in expensive legal and financial penalties, especially when workplace injuries occur without proper Workers' Compensation insurance.  

Hawaiʻi's culture of helping friends and family can create unexpected workplace issues if an on-the-job injury occurs. It might seem easier to pay someone under the table for small jobs or home repairs, but you could end up facing fines, legal trouble, or gaps in coverage when something goes wrong. 

Workers' Compensation isn't optional in Hawai'i, it's the law. The penalties for skipping it can destroy your business faster than any lawsuit. 

The Law: No Exceptions, Real Penalties 

Hawaiʻi requires Workers' compensation insurance for every business with one or more employees, whether they are full-time or part-time, permanent or temporary.  

Workers' Compensation doesn't automatically cover everyone. Some jobs are excluded, such as: 

• Volunteers at churches, charities, schools, or nonprofits, 

• Students working for their school in exchange for housing, meals, or tuition, 

• Religious leaders like ministers, priests, or rabbis, 

• Household workers earning less than $225 cash per quarter, 

• Household workers employed by people on welfare, and 

• Real estate agents paid only through commissions. 

However, employers can choose to provide Workers' Compensation coverage for these excluded workers if they want to. Federal laws cover workers employed by the federal government and workers engaged in fishing, maritime and longshoring activities [1]. 

The Hawaiʻi Disability Compensation Division enforces compliance rigorously. Businesses that fail to provide required coverage may face penalties starting at $500, or $100 per employee for each day of non-compliance [1]. For instance, if three employees work three shifts a week, the resulting fines could total $900 per week, quickly adding up and putting your business at risk. 

What Workers' Compensation Actually Covers 

If found to be compensable, Workers' Compensation covers medical expenses and lost wages when employees get hurt on the job. But it does something highly valuable for a business owner: it may help to protect you from lawsuits. 

When an employee is entitled to receive Workers' Compensation benefits, they generally can't sue you for the injury. This "exclusive remedy" provision saves Hawaiʻi businesses from devastating legal costs. The coverage includes medical treatment, services and supplies; typically pays two-thirds of the employee's average weekly wages while they recover, and handles rehabilitation costs. For serious injuries requiring mainland specialists, those expensive medical flights and treatments may be covered too. 

Who Needs Coverage (And Common Mistakes) 

Employers need coverage if they have even one employee, but the biggest mistake Hawaiʻi business owners make is misclassifying workers as independent contractors. The state uses strict tests to determine employee status. Just calling someone a contractor doesn't make it true. If you control when, where, and how they work, they're probably employees. If they use your equipment and work only for you, they're probably employees.  

Family members working in your business need coverage too. Your spouse managing the books, your adult child handling deliveries, they're employees under Hawaiʻi law. Certain business owners are not automatically covered, but can decide to opt into coverage for themselves, and that is usually wise. The cost is minimal compared to the protection it provides. 

Why Rates Vary by Industry  

Workers comp rates aren’t random, they are calculated based on hard data about risk levels, work types, and claims history. High-risk industries pay more due to frequent hazards, while low-risk businesses face minimal physical dangers. 

Nationally standardized job classification codes assign each business type a specific risk rating based on historical data. This is why it's crucial to be transparent and answer your insurance agent's questions honestly. Proper classification from day one ensures you get the right coverage at the correct rate. 

Factor these costs into your business planning from day one. Workers' compensation isn't an unexpected expense, it's a predictable operating cost based on your payroll and risk level.

Compliance - for Employers  

Employers are prohibited from requiring the employee to contribute towards the business’s Workers Compensation insurance premiums. Each employer shall post and maintain in places readily accessible to employees a printed statement concerning benefit rights, claims for benefits, and such other matters relating to the administration of the workers’ compensation law. Each employer shall furnish within three working days of notice of injury to each injured employee a copy of the brochure, Highlights of the Hawaiʻi Workers’ Compensation Law [1]. 

Getting Coverage 

If you don't have Workers' Compensation coverage, get it today. The Hawaiʻi Disability Compensation Division actively enforces compliance, and the penalties add up fast. An employer can secure Workers Compensation coverage by purchasing insurance from a carrier authorized to transact within Hawaii through an independent insurance agent.  If you have coverage, review it annually. Make sure your employee classifications and payroll estimates are accurate. As your business grows, your insurance needs change too. 

Contact a licensed Hawaiʻi insurance agent today to ensure your business stays compliant and protected. 

Frequently Asked Questions

Q: Do I need Workers' Compensation insurance if I only have one part-time employee? 
 A: Yes, Hawaiʻi law requires coverage for every business with one or more employees, regardless of whether they work full-time or part-time. 

Q: What are the penalties if I don't have Workers' Compensation insurance? 
 A: Penalties start at $500 or $100 per employee for each day of non-compliance, which can quickly add up to thousands of dollars. 

Q: Does Workers' Compensation cover family members who work in my business? 
 A: Yes, family members including spouses and adult children who work for your business are considered employees and must be covered under Hawaii law. 

Q: Can I classify my workers as independent contractors to avoid getting Workers' Compensation? 
 A: No, Hawaiʻi uses strict tests to determine employee status based on control, equipment use, and exclusivity, and misclassification can result in expensive legal and financial penalties. 

Q: What does Workers' Compensation insurance actually protect me from? 
 A: It covers your employees' medical expenses and lost wages from work injuries while protecting your business from costly lawsuits through the "exclusive remedy" provision. 

Additional Resources 

Primary DCD Sources

• Hawaiʻi Disability Compensation Division: https://labor.hawaii.gov/dcd/ 

• About Workers' Compensation: https://labor.hawaii.gov/dcd/home/aboutwc/ 

• DCD FAQ: https://labor.hawaii.gov/dcd/frequently-asked-questions/ 

• Forms and Guidelines: https://labor.hawaii.gov/dcd/forms/

Sources 

1. Hawaiʻi Department of Labor and Industrial Relations. Workers’ Compensation Division – Frequently Asked Questions. Hawaiʻi Department of Labor and Industrial Relations. Accessed September 23, 2025. https://labor.hawaii.gov/dcd/frequently-asked-questions/