Do You Need Workers’ Comp for 1099 Subcontractors?

It’s the question every contractor who hires help eventually asks: if I pay someone on a 1099, am I off the hook for workers’ comp? The honest answer is no — not the way most people think. A 1099 changes the tax paperwork; it does not erase workers’ comp exposure.

Two different questions

“Do 1099 subs need workers’ comp?” is really two questions:

• Does the subcontractor have to carry their own coverage? That depends on the state and whether the sub has employees.
• Do you pay for it if they don’t? At your audit, very often yes.

The second one is the expensive one, and it’s the one contractors miss.

Why an uninsured 1099 sub becomes your premium

Workers’ comp premium is based on payroll. When your policy audits, the carrier looks at who you paid. If a 1099 sub can’t show they carried their own workers’ comp, the auditor can fold what you paid them into your payroll and charge premium on it — usually at your governing (highest) class rate. In most states the upstream contractor is responsible for an uninsured sub’s injured workers, so the carrier prices that risk to you.

In other words: 1099 or not, if the coverage isn’t documented, the exposure is yours.

The sole-proprietor trap

Here’s where it gets counterintuitive. In many states a sole proprietor or single-member LLC with no employees is allowed to skip carrying workers’ comp on themselves. That’s legal for them — and a problem for you. If that sub is uninsured (even legitimately) and can’t produce a valid exemption, your carrier can still charge you for their pay at audit.

So “my sub doesn’t need it” and “I won’t get charged for my sub” are not the same statement. The fix is documentation: either a certificate of insurance with a workers’ comp line, or, where your state allows it, a valid exemption certificate on file.

What to require from every sub

• A certificate of insurance showing a workers’ comp line (general liability alone won’t exclude them), or a state-issued exemption where applicable.
• Dates that cover the entire period they work for you — collected before the first payment, re-collected if it expires mid-job.
• A signed contract and 1099 that support genuine subcontractor status (so they aren’t reclassified as employees on other grounds).

You can test any sub’s certificate in under a minute with the free COI Gap Checker — it flags a missing WC line or a date gap and estimates what it could cost you.

Bottom line

Don’t rely on “they’re a 1099.” Rely on a documented workers’ comp line or a valid exemption, for the exact dates the sub worked. That’s the difference between a clean audit and a surprise bill. See your exposure with the free calculator →

This is general information for contractors, not legal or insurance advice. Workers’ comp rules vary by state — confirm yours with your carrier or agent.