Workers' comp for 1099 employees
Workers' compensation insuranceprotects employees from illness and injury on the job. It's mandatory in most states but determining whether it's required for businesses that hire contractors, sometimes called 1099 employees, can be a bit more complicated. Rules about 1099 workers' comp vary depending on factors like industry and state law.
Do I need workers' comp for 1099 employees?
Generally, workers' comp for 1099 employees isn't legally required. While businesses with a certain number of employees must carry workers' compensation insurance in their state, workers who receive a 1099 are technically contractors — and rules for covering them are different.
Most states don't require workers' comp for contractors, but there are a few exceptions. In some cases, even if a business wants to provide coverage, 1099 workers may not qualify. For example, in New York, 1099 workers who meet the legal definition of an independent contractor aren't eligible for workers' compensation.
If you're in a state where contractors can be covered, offering workers' compensation for 1099 employees is worth considering. If they're ever injured on the job, this insurance can help pay for medical bills and other related expenses.
If you hire a lot of independent contractors but can't provide workers' comp, consider employers liability coverage. It helps cover legal costs if someone gets hurt or sick while working and decides to sue.
Sole proprietors and workers' comp
If you're a sole proprietor who gets 1099s for contract work, you may benefit from carrying workers' comp for yourself. Some businesses require contractors to have coverage, even when the law doesn't, so having a policy could make it easier to find jobs.
Check your local laws or contact our team of experts to determine whether you need workers' comp as an independent contractor or self-employed business owner.
State laws and 1099 employee workers' comp FAQs
Each state has its own rules for workers' compensation and 1099 employees. The following common questions about state laws can help you understand what applies to you.
Do monopolistic states require 1099 employee workers' comp?
In four states, called monopolistic states, workers' comp is sold through a state fund. They each have different rules regarding 1099 employees:
- North Dakota: Employers don't have to provide workers' comp for independent contractors. However, anyone paid to provide services for someone else is considered an employee unless proven otherwise through a test.
- Ohio: Businesses don't need to provide coverage for 1099 workers.
- Washington: Even if you pay workers by 1099, they could still qualify for workers' comp. Only true independent contractors are exempt, and you'll need to prove that they meet specific criteria on a case-by-case basis.
- Wyoming: A three-part test determines whether a worker is an independent contractor or an employee. Any worker who doesn't meet all three criteria is automatically considered an employee and is eligible for workers' comp.
Regardless of how many employees and contractors you work with, businesses in monopolistic states can benefit from stop gap insurance, which provides protections to employers that state funds don't.
Do other states require workers' comp for 1099 employees?
In most states, employers don't need to provide 1099 employees with workers' comp. But there are some exceptions, especially for certain kinds of work where injuries are more likely.
Some notable rules include:
- California requires sole proprietors in the construction industry to have workers' comp.
- Florida mandates that construction companies cover all workers, including contractors.
- New York has special rules for construction and trucking to determine if a worker qualifies as an independent contractor.
- Pennsylvania presumes all workers are employees and require coverage unless proven otherwise.
- Texas is the only state that doesn't require workers' comp, except for businesses that contract with the government.
Even in states where coverage isn't required for 1099 workers, misclassifying an employee as an independent contractor and not providing workers' comp can lead to fines and legal consequences. This issue is especially important for high-risk industries like construction, trucking, and agriculture.
The bottom line on 1099 employees and workers comp
Most states don't require employers to provide workers' comp for independent contractors. However, it's important that businesses don't misclassify employees to save money. If you choose not to cover your 1099 workers, requiring them to have their own policy can reduce the likelihood of a lawsuit related to on-the-job injuries.
If you're unsure whether you can — or need to — offer workers' comp to your independent contractors, our team can help. Call the experts at Progressive Commercial or start a quote online to get personalized workers' comp coverage that keeps your business and team protected.
