Our TN Nonprofit: Do We Need Workers Comp?

A Tennessee nonprofit is an employer like any other, so it follows the same five-employee rule: once it regularly employs five or more paid people, it must carry workers compensation. There is no charity or nonprofit exemption in Tennessee's Workers' Compensation Law, so being a 501(c)(3) or tax-exempt organization changes your taxes, not your duty to cover the people you pay once you reach the trigger. Below five paid employees a nonprofit is not forced to carry it, though many do.

Who this is for: Tennessee nonprofits and charities, from a small community group with a couple of paid staff to an established organization with a full team and a board of directors.

The short version

A nonprofit follows the standard rule and is mandated once it regularly employs five or more paid people.
There is no charity or nonprofit exemption; tax-exempt status does not change the coverage duty.
A genuine unpaid volunteer who receives no pay is generally not an employee and does not count.
Paid officers or directors are treated like corporate officers, so they count toward the five and are covered by default.
Grants and facility-use agreements often require proof of coverage before you can operate.

Paid staff, officers, and volunteers

The line that matters for a Tennessee nonprofit is pay. Anyone the organization pays and directs like an employee counts toward the five, whether the job is full time, part time, or seasonal. A genuine volunteer who receives no wages is generally not an employee, so pure volunteers usually do not count toward the trigger; but the moment a volunteer is paid a wage or a regular stipend that looks like pay, treat them as an employee. Because most nonprofits are incorporated, a paid officer or director is treated like a corporate officer, which means they count toward the five and are covered by default unless they file to opt out.

Person	Counts toward five?	Notes
Paid staff member (full or part time)	Yes	Counts toward the trigger; covered once you reach five
Genuine unpaid volunteer	No	No wages usually means no employee status; confirm if a stipend is involved
Paid officer or director	Yes	Treated like a corporate officer; counts toward the five, covered unless opted out
Stipend worker or paid intern	Usually yes	Regular pay generally makes them an employee; do not assume they are exempt

The exemption you are thinking of does not exist

Owners of small nonprofits often assume charities get a pass on workers comp. In Tennessee they do not. The Workers' Compensation Law reaches nonprofits the same as any other employer and does not carve out charitable or religious organizations, so once you regularly employ five or more paid people, a paid program coordinator or a paid bookkeeper is an employee who must be covered. What is different from some states is only the number: the mandate arrives at five paid people, not the first one, unless the nonprofit happens to do construction, which starts at the first worker.

Grants, leases, and proof of coverage

Beyond the state mandate, workers comp is often a condition of doing your work. Government grants, foundation funding, and facility-use or lease agreements commonly require the nonprofit to carry coverage and to show proof of it before funds flow or doors open. A nonprofit that has covered its paid staff can produce that proof quickly, which keeps grant timelines and program launches on track, and many small nonprofits buy a policy before they hit five employees just to satisfy a funder.

A Murfreesboro example

Illustrative, not a quote. A Murfreesboro community nonprofit runs mostly on volunteers but pays a full-time program director, a part-time coordinator, and three part-time after-school staff. Because it regularly employs five paid people, Tennessee requires a policy, and all five are covered, while the unpaid volunteers are generally not employees. The board members serve without pay and do not count. When a state grant requires proof of coverage before releasing funds, the nonprofit already has a policy and sends the certificate the same day. See our workers comp for nonprofits page.

Real questions Tennessee owners ask

Does our Tennessee nonprofit need workers comp?

Once it regularly employs five or more paid people, yes. Tennessee has no nonprofit or charity exemption, so a nonprofit follows the same five-employee rule as any business. Construction work would start at the first worker.

Are we exempt because we are a 501(c)(3)?

No. Being tax-exempt changes your taxes, not your duty to cover paid workers. Tennessee's Workers' Compensation Law reaches nonprofits the same as any other employer once they reach five paid people.

Do unpaid volunteers count toward the five?

Generally no. A genuine volunteer who receives no wages is usually not an employee and does not count. But if a volunteer is paid a wage or a regular stipend that looks like pay, treat them as an employee.

Are our board members or officers covered?

Paid officers or directors are treated like corporate officers, so they count toward the five and are covered by default, with the option to file to opt out. Unpaid board members are generally not employees.

We have three paid staff. Do we need coverage yet?

Not by the state, since Tennessee mandates coverage at five paid people. Many nonprofits with three or four staff still buy a policy, because a funder or lease requires it and one injury can cost more than the premium.

Do grants or leases require workers comp?

Often. Government grants, foundation funders, and facility or lease agreements commonly require the nonprofit to carry coverage and show proof of it before funds are released or space is used.

What if our nonprofit does not carry required coverage?

Tennessee can charge about 1.5 times a year of premium and ask a court to bar you from operating on a repeat. The nonprofit also loses the usual protection, so an injured paid worker can pursue it directly.

Why Tennessee owners choose Morrow

We shop the right market for you. In Tennessee you buy workers' comp on the open, competitive market from any private insurer licensed in the state, because there is no state fund, and if no insurer will take you the NCCI-run Tennessee Workers Compensation Insurance Plan is the guaranteed backstop, so we can shop your rate freely and still have a fallback for hard-to-place work.
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 Tennessee guides

Every Tennessee 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.

This guide is general information, not legal advice. Tennessee rules and penalty amounts can change, so verify current requirements with the Tennessee Bureau of Workers' Compensation or a licensed advisor before you rely on them. Last updated: July 2026.