New Minnesota Requirements for “Zero Exposure” Workers’ Compensation Policies: What General Contractors in the Construction Industry and Their Insurers Need to Know
Minn. Stat. § 176.215 establishes a longstanding framework under which a general contractor and its workers’ compensation insurer may be liable for workers’ compensation benefits owed to the employees of an uninsured subcontractor. This statutory “up-the-chain” liability creates significant exposure for both general contractors and their workers’ compensation insurers.
A subcontractor’s failure to provide workers’ compensation coverage can arise in two ways: the subcontractor may be entirely uninsured, or the subcontractor may carry a “zero exposure policy,” as defined in Minn. Stat. § 176.011, subd. 19a, representing that it has no employees when in fact it does.
Historically, a subcontractor with a zero exposure policy could present a general certificate of insurance without disclosing that the underlying policy did not actually provide workers’ compensation coverage for employees. As a result, hiring a subcontractor with a zero exposure policy has long presented a hidden risk for general contractors: if the subcontractor brings workers onto the job site and one of those workers is injured, workers’ compensation liability may extend up the contracting chain to the general contractor and its insurer.
This framework has effectively placed the burden on general contractors to verify that subcontractors are properly insured. Effective January 1, 2026, new laws provide general contractors with additional tools to verify insurance coverage, but they also impose additional compliance obligations. They may also increase financial exposure if the new legal requirements for document retention are not met, including the risk of substantially increased premiums following an audit by the general contractor’s workers’ compensation insurer.
Below is a summary of the new requirements applicable to subcontractors and general contractors, followed by additional practical steps that may help reduce risk.
New Requirements Applicable to Subcontractors
To obtain a zero exposure policy, a subcontractor must provide its insurer with a sworn statement or attestation confirming that it has no employees. Minn. Stat. § 79.101.
If the subcontractor later hires an employee, it must notify its insurer within 60 days. Minn. Stat. § 79.101.
A subcontractor with a zero exposure policy must provide the general contractor with a full copy of the workers’ compensation policy, rather than only a certificate of insurance. Minn. Stat. § 176.185, subd. 12.
The subcontractor must also provide written notice of its zero exposure policy to all parties with whom it contracts. Minn. Stat. § 176.185, subd. 12.
New Requirements Applicable to General Contractors
After receiving the full copy of the workers’ compensation zero exposure policy and the required written notice, the general contractor must retain those documents for three years. Minn. Stat. § 176.185, subd. 12.
Additional Steps to Reduce Risk for General Contractors and Their Insurers
- Risk of Relying Solely on a Certificate of Insurance for Regular Policies
These new statutory requirements apply to zero exposure policies, not to standard workers’ compensation policies. As a result, a general contractor may still accept only a certificate of insurance from a subcontractor that claims to carry a regular workers’ compensation policy. That approach, however, presents meaningful risk if the subcontractor is not being candid and the policy is actually a zero exposure policy.
Use the Minnesota Department of Labor and Industry insurance verification tool.
As part of the new legal framework, the Minnesota Department of Labor and Industry’s insurance verification website will now identify whether a policy is a zero exposure policy. General contractors can use this tool to confirm whether a subcontractor that provides only a certificate of insurance actually carries a standard policy rather than a zero exposure policy.
Require full policy documentation regardless of policy type.
General contractors may also reduce this risk by requiring all subcontractors to provide a full copy of the workers’ compensation policy, regardless of whether the policy is represented as a zero exposure policy or a standard policy.
- The 60-Day Notice Requirement Does Not Require Notice to the General Contractor
The new statutory framework requires a subcontractor to notify its insurer within 60 days after hiring an employee. It does not require the subcontractor to notify the general contractor. That creates an ongoing risk on longer-term projects, where a subcontractor may begin work with no employees but later hire workers without informing the general contractor.
Implement a 60-day compliance check.
One way to mitigate this risk on longer projects is to require subcontractors with zero exposure policies to provide an updated written certification every 60 days confirming that they still have no employees.
Revise subcontract agreements to require direct notice.
General contractors should also consider revising their subcontract agreements to require any subcontractor with a zero exposure policy to provide prompt written notice if it later hires an employee.
Conclusion
The new Minnesota statutory requirements governing zero exposure policies increase transparency, but they do not eliminate the underlying exposure created by Minn. Stat. § 176.215. General contractors and their insurers should continue to treat subcontractor workers’ compensation compliance as a significant risk-management issue. The safest approach is to adopt procedures that go beyond the statutory minimum, including independent verification of policy status, retention of required documentation, and contractual provisions requiring ongoing disclosure by subcontractors.
If you have questions about ensuring compliance with the new rules governing zero exposure policies, or other workers’ compensation matters, please reach out to me, or any of my colleagues here at Brown & Carlson.