Business owners are often confused about obtaining Workers’ Comp for independent contractors.  Can coverage for an independent contractor be obtained from the hiring entities policy?  If the independent contractor has a proper 1099, does that make a difference?  What if the independent contractor is a one-man shop & files an exemption with the State?  We will attempt to address these concerns.


From a big picture perspective, the intent of Workers’ Compensation is to provide a policy to cover an employee while on the job, for medical bills derived from injuries sustained at work.  As a business owner is essentially “putting the employee in harm’s way”, the State puts the onus on the business owner to procure the policy.  However, the owner of the business can exempt themselves from coverage.  In doing so, they preclude themselves from collecting Workers’ Comp benefits from their policy, in the event they get hurt while on the job.


When one hires an outside contractor, who has their own insurance, the payroll associated with that work will not contribute to computing the premium for your policy.  Should they have a claim, the subcontractor’s policy will get triggered and will pay for those losses.  However, if you hired an outside contractor who does not maintain Workers’ Compensation coverage; the law will force your policy to cover the associated claims.  As such, the carrier will charge you for payments made to outside contractors who did not maintain their own policy.


Being paid with a 1099 is commonplace, but not indicative how the Workers’ Comp board will treat a 1099 outside contractor who attempts to collect on a claim.  Many people favor 1099 status because of tax advantages; however, perhaps they do not meet all the requirements of a true 1099.  Therefore, should you hire an outside contractor, you need to factor into your overall cost the rate you will be charged for the activities performed by this 1099-employee.


An owner operator can be within their right to exempt themselves from procuring Workers’ Compensation; however, that only deals with their first party responsibility.  Should you hire said individual, they could be considered working for you as an employee.  As such, you will need to cover them for Workers’ Compensation & ultimately pay for it upon audit.


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Marc Rovner