Starting on January 1, 2026, Minnesota will implement significant changes to its workers’ compensation system, specifically targeting the use of “zero estimated exposure policies” (also known as “if-any” policies) within the construction industry. These updates passed during the 2025 legislative session aim to increase transparency and accountability among contractors who operate without employees or payroll.
What Is a Zero Estimated Exposure Policy?
A zero estimated exposure policy is a type of workers’ compensation insurance that allows entities to report zero payroll exposure, typically because they have no employees. These policies are common among sole proprietors or small contractors who subcontract all labor. While they offer a cost-effective way to meet insurance requirements, they have also raised concerns about coverage gaps and misrepresentation in the construction sector.
Key Requirements Under the New Law
Under the new legislation, contractors who obtain a zero estimated exposure policy must:
- Submit a signed attestation to their insurance carrier confirming they have no employees or payroll.
- Notify their contracting partners in writing that they hold a zero estimated exposure policy.
- Provide a copy of the policy to each entity they contract with for construction services.
- Notify their insurance carrier within 60 days if they hire employees or begin incurring payroll expenses.
- Maintain documentation for three years, including the written notices and copies of insurance policies received from subcontractors.
Additionally, the Minnesota Department of Labor and Industry will make it easier to verify coverage status by updating its workers’ compensation insurance lookup tool to indicate whether a contractor holds a zero estimated exposure policy. See https://dli.mn.gov/business/workers-compensation/zero-estimated-exposure-and-wrap-policies.
Impact on Construction Contractors
For general contractors, this law introduces new administrative responsibilities. They must now track and retain documentation from subcontractors who use zero estimated exposure policies. Failure to do so could expose them to liability if an uninsured worker is injured on the job.
Contractors will also need to review and update contracts to ensure compliance with the new disclosure requirements. This includes incorporating clauses that mandate subcontractors to provide proof of workers’ compensation coverage and notice of any changes.
For small contractors, the law adds a layer of scrutiny. While zero estimated exposure policies remain legal, the new attestation and disclosure rules make it harder to misuse them. Contractors who previously operated in a gray area by claiming no payroll while using labor will now face a greater risk of enforcement and penalties.
Looking Ahead
The law is part of a broader effort to protect workers, reduce fraud, and ensure fair competition in Minnesota’s construction industry. By increasing transparency, the goal is to help project owners and contractors identify potential coverage gaps before work begins, reducing the risk of costly disputes and litigation.
Contractors should begin preparing now by reviewing their insurance policies, updating internal procedures, and consulting legal counsel to ensure full compliance before the law takes effect.
If you have any questions related to the information above, please contact Blake Nelson at bnelson@hjlawfirm.com.
