In South Dakota you are not legally required to carry workers compensation insurance. The state is one of only a couple where this coverage is optional for private employers, so there is no employee count that forces you to buy it. What South Dakota does instead is leave an uninsured employer fully on the hook for a hurt worker, who can then choose either a lawsuit or double benefits, which is why most owners still carry it.
Who this is for: Any South Dakota employer, from a first hire to a few hundred workers, weighing whether to buy workers comp or run uninsured.
The short version
- South Dakota does not require private employers to carry workers comp. The state labor department says so directly, and there is no headcount that changes that.
- There is no employee count trigger, because there is no mandate to trigger. Part-time, seasonal, and family workers do not create one.
- If you go without coverage, you lose the protection that comp normally gives you, and a hurt worker can sue you for full damages.
- Instead of suing, the worker can choose double workers comp, meaning their medical costs plus twice the usual benefits.
- Unlike some opt-out states, South Dakota lets you keep your ordinary legal defenses if a worker sues, but one serious injury can still cost far more than a policy.
What "optional" really means in South Dakota
Optional does not mean consequence-free. When you carry workers comp, the law makes it the only claim a hurt employee can normally bring against you, a protection lawyers call the exclusive remedy. When you skip it, the state treats you as having opted out of that deal. You are not breaking any law and the state will not fine you or shut you down, but you give up that shield, and the worker gets to decide how to come after you.
The worker's choice is the heart of it. A hurt employee of an uninsured South Dakota employer can either sue you in court for full damages or elect to collect double workers comp. They cannot do both, but they get to pick, and they will pick whichever is worse for you.
Carrying comp vs going without, at a glance
| Question | You carry comp | You go without |
|---|---|---|
| Can an injured worker sue you in court? | Generally no, comp is their only claim | Yes, for full damages |
| Can the worker collect doubled benefits? | No, benefits are set by the policy | Yes, if they choose comp instead of suing |
| Does the state fine you for going without? | Not applicable | No state fine, no stop-work order |
| Can you use normal legal defenses if sued? | No lawsuit to defend | Yes, South Dakota keeps your defenses |
| Predictable cost of a serious injury? | Yes, capped by the policy | No, open-ended |
Why most South Dakota owners still buy it
The math usually favors coverage. A workers comp policy turns an unpredictable event, a bad injury, into a known annual cost, and it keeps a hurt employee out of court. Beyond the risk, the people you do business with often decide for you: general contractors, landlords, and larger clients routinely demand proof of coverage before they will sign, and on public construction the awarding body will ask for proof of coverage or a signed statement that you do not participate. If any contract in your pipeline requires it, the choice is effectively made.
A Rapid City example
Illustrative, not a quote. A Rapid City cafe owner hires four kitchen and counter staff and wonders whether the law makes her buy workers comp. It does not, because South Dakota coverage is optional. She weighs going without it against a policy. If a cook is badly burned, an uninsured owner could be sued for damages or face a doubled benefit award, and a single serious kitchen injury can cost far more than a year of premium. She also learns her landlord's lease and a catering client both require proof of coverage. She decides to buy, and asks us to shop the cafe's class of work so the price reflects a small quick-service kitchen. See our workers comp for restaurants page.
Real questions South Dakota owners ask
Is workers comp legally required for my South Dakota business?
No. South Dakota is one of the few states where workers comp is optional for private employers, so there is no employee count that forces you to buy it. The trade-off is that going without it leaves you exposed to a lawsuit or to double benefits.
What happens if I just do not carry it?
You are treated as having opted out of the workers comp system. The state will not fine you, but you lose the protection that normally keeps a hurt employee from suing you, and that worker can choose to sue you for full damages or collect double workers comp.
What is double workers comp?
If you are uninsured and a hurt worker chooses the comp route instead of suing, South Dakota lets them collect their medical costs plus twice the other benefits they would normally receive. It is the state's built-in penalty for going without coverage.
Do part-time or seasonal workers make coverage required?
No. Because South Dakota has no headcount trigger, adding part-time, seasonal, or family workers does not create a mandate. Coverage stays optional no matter how many people you employ, though every added worker adds to your exposure.
If comp is optional, can I still be sued if someone gets hurt?
Yes, and that is the point. Without coverage you have no exclusive-remedy shield, so a hurt worker can take you to court for full damages. Unlike some opt-out states, South Dakota does let you use your normal legal defenses in that suit.
Does a client or landlord contract override the fact that comp is optional?
In practice, yes. A general contractor, landlord, or larger client can require proof of coverage as a condition of the deal. The state does not force you to buy it, but you cannot take that contract without meeting the requirement.
Do I have to carry comp on a public construction job?
The awarding government body sets the rule, not a statewide license law. On public projects you will usually be asked for proof of coverage or a signed statement that you do not participate in the workers comp system, so plan on showing coverage to win the work.
Why South Dakota owners choose Morrow
- We shop the right market for you. South Dakota workers comp is optional, so Morrow first helps you decide whether to carry it, then places coverage fast through the state's competitive private market of authorized carriers, since South Dakota has no state fund and no monopolistic fund of any kind.
- We catch pricing mistakes. Your price depends heavily on the category your work falls into for pricing (the class code). Put people in the wrong category and you overpay for years. We review your payroll and classifications before you buy.
- Proof of coverage, fast. Need a certificate (proof of coverage) for a general contractor or a landlord before Monday? We turn those around the same business day for most carriers.
- We help lower the score that drives your price. Insurers give you a score based on your past claims that raises or lowers your cost (the experience modification rate). We review it each year, flag errors, and connect you with return-to-work and safety resources that bring it down.
- Real people when a claim happens. When someone gets hurt, we stay involved through the life of the claim, not just at renewal.
Related South Dakota guides
Every South Dakota business is set up a little differently. These companion guides answer the same question for other situations, plus the national explainers behind the terms used here.
- Business insurance in South Dakota (start here)
- I own an LLC: do I need workers comp?
- I'm a sole proprietor: do I need workers comp?
- I own a corporation (C-corp or S-corp): do I need it?
- We're a partnership: do we need workers comp?
- We're a nonprofit: do we need workers comp?
- My workers are 1099: do I still need it?
- Only part-time or seasonal staff: do I need it?
- I only employ family: do I need workers comp?
- Remote or out-of-state staff: do I need coverage?
- What happens if I don't carry workers comp?
- How much does workers comp cost?
- How do I get workers comp (even if turned down)?
- What insurance do I need for a contractor license?
- Workers compensation insurance, explained
- What workers comp costs (national guide)
- Hiring your first employee: what changes
- What workers comp does not cover
- South Dakota restaurant workers comp
This guide is general information, not legal advice. South Dakota rules and penalty amounts can change, so verify current requirements with South Dakota Department of Labor and Regulation, Division of Labor and Management or a licensed advisor before you rely on them. Last updated: July 2026.