Workers’ compensation insurance provides financial support for medical expenses, lost wages, and other costs following a workplace accident or on-the-job illness. It’s mandatory for employers to take out a policy in every US state except Texas. And 36 states plus Washington D.C. require it for companies with at least one employee.

Full-time, part-time, and even seasonal employees are covered by workers’ comp. But in most cases, a company’s workers’ comp policy doesn’t protect independent contractors, sole traders, sole proprietors, freelancers, or gig contractors. To make sure you and any employees you might have are protected following a workplace accident, you might need to take out your own insurance policy.

Why do companies hire independent contractors?

Hiring an employee costs companies a great deal of money. That’s because:

  • Employees are usually entitled to workers’ compensation coverage
  • Employers must pay payroll taxes for employees and contribute to their state’ unemployment insurance program
  • Employers must comply with a complicated mix of federal and state laws regarding their employees

To keep costs as low as possible, some companies prefer to hire independent contractors to do the work of regular employees. They might even provide contractors with a 1099 tax form so the contractor can declare non-wage, salary, and tip income as miscellaneous income to the Internal Revenue Service (IRS) for tax purposes. That said, some states require employers to provide workers’ comp for 1099 contractors.

When are independent contractors covered by workers’ compensation?

Workers’ compensation insurance is intended to support employees. But there are times when an independent contractor’s work for a client company is almost indistinguishable from employee status. In such cases, a contractor might qualify for workers’ comp, and their client company may even be penalized for having misclassified its workers.

There are five major factors that determine whether an independent contractor should be considered an employee:

  • The right of either party to discharge a contract
  • The amount of control the employer has over how the contractor does their job
  • The amount of control the employer has over where the job is done
  • Whether the employer provides tools and materials
  • How payment is provided

Of these, control over the contractor’s duties has the greatest impact in determining the relationship. In a legal dispute over whether the employer is required to provide workers’ comp benefits, a jury might also consider:

  • Whether specific training has been given, as this shows that the employer has exercised greater control over how work is performed
  • How much instruction the employer gives the workers
  • Whether or not the worker is expected to collaborate with others
  • Whether the worker is allowed to subcontract other companies
  • Whether the employer pays for business expenses

If you’ve been classified as an independent contractor but are actually part of a traditional employee-employer relationship, you might be entitled to workers’ comp. Reach out to Phalen Law today to discuss your case, and we’ll help you determine whether you’re eligible to file a workers’ comp claim.

Buying your own workers’ compensation insurance

While precedent exists for workers being misclassified, in the vast majority of cases an independent contractor simply isn’t covered by their client’s workers’ compensation policy.

One option is to write into your initial contract that your client is responsible for buying workers’ compensation coverage on your behalf. But this extra expense might discourage them from hiring you.

The best way to ensure you’re covered in the event of a workplace accident or illness as an independent contractor is simply to buy your own insurance policy. Your client might even ask that this be included in your contract to protect themselves in case you try to file a claim against them.

Be aware that personal health insurance policies don’t usually cover work-related injuries or on-the-job illnesses. You’ll need to purchase workers’ comp or a similar insurance policy that specifies these particular incidents. And since these policies are unlikely to cover other liabilities, you might want to consider general liability, error and omissions, commercial auto insurance, and other such policies as well.

Some states require workers’ compensation for high-risk construction jobs such as roofing, even if you don’t have any employees. And if you do hire others to work for you, you’ll probably be required to take out your own workers’ insurance policy to make sure they’re protected.

The average cost of workers’ compensation in the US is around $45 per month. You can offset these costs by factoring them into your quote.

Do you need workers’ comp insurance if you only hire subcontractors?

Some states require that you take out a workers’ compensation policy when you hire subcontractors, even if they’re covered under their own policy. And remember, if you’re misclassifying employees as subcontractors – intentionally or otherwise – you could be at risk of heavy fines and legal proceedings!

Think you’ve been misclassified as an independent contractor?

Independent contractors aren’t typically covered by a client company’s workers’ insurance policy. So they need to take out their own work-related insurance or ask the client to do so on their behalf as part of the contract agreement. But if you’ve been denied workers’ compensation as an independent contractor while fulfilling the exact same role as an employee, contact Phalen Law immediately.

We’ll assign you a trained and experienced workers’ comp lawyer to listen to your case and establish whether you have grounds to make a claim. If you do, we’ll work with you to gather all the necessary evidence and provide expert legal defense if the case goes to court. By working with Phalen Law, you give yourself the best possible chance to receive the compensation you deserve following your workplace accident.

Give us a call or fill out our Free Case Evaluation form to get started.