1099 Contractors vs. Employees for Workers' Comp

True 1099 contractors don't trigger workers' comp

If a worker is genuinely an independent contractor — runs their own business, has their own tools, sets their own hours, can hire their own helpers, and works for multiple clients — they don't trigger workers' comp coverage requirements on your policy.

But the bar is high. Most states use an 'ABC test' or similar three-pronged test, and many workers labeled 1099 fail at least one prong.

The ABC test most states use

(A) The worker is free from your control and direction in performing the work — they decide how to do the job.

(B) The work is OUTSIDE your usual course of business — a plumber hired by a software company is outside; a delivery driver hired by a delivery company is inside.

(C) The worker is customarily engaged in an independently established trade — they have other clients, a real business name, business insurance, etc.

Fail any one of A, B, or C and the worker is an employee for workers' comp purposes regardless of any 1099 paperwork.

If a 1099 sub gets hurt on your job

If your 1099 sub doesn't have their own workers' comp coverage and gets hurt on your job site, in most states YOU become liable as the 'statutory employer.' The injured sub can claim against your policy, and your carrier will charge you back-premium for the sub's earnings.

Always require subs to provide a Certificate of Insurance (COI) showing active workers' comp coverage BEFORE they start work. Keep COIs on file for 7 years.

Construction is special

Many states (Florida, California, New York, others) hold construction general contractors liable for workers' comp on ALL workers on the job site — including 1099 subs and the subs' subs — if anyone in the chain is uninsured.

In Florida and California, even sole-proprietor construction subs can't easily be exempt — they need formal exemption certificates.

How to handle 1099 workers safely

(1) Verify each 1099 sub carries their own active workers' comp policy — get a current COI before work starts.

(2) If a sub is sole-proprietor and exempt, get their state-issued exemption certificate on file.

(3) Have a written subcontractor agreement that defines them as independent contractors and addresses insurance requirements.

(4) Don't direct their daily work, set their hours, or provide their tools.

(5) When in doubt, add them to your workers' comp policy — premium for proper classification beats back-premium + penalties + a denied claim.