Do You Need Workers' Compensation for Independent Contractors?

Independent contractors are not covered by workers' compensation insurance, which applies only to employees. Employers can legally hire contractors without providing this coverage because contractors are considered self‑employed and responsible for their own workplace injuries.

Legal Basis for the Exemption

State workers' compensation statutes define an employee as someone who works under an employer's control, direction, and supervision. Contractors who control their own work schedule, methods, and tools fall outside this definition and are therefore not entitled to workers' compensation benefits.

Contractor Responsibilities

Contractors must obtain their own insurance, such as general liability and professional liability policies, to cover injuries that occur on the job. They may also carry their own workers' compensation policy if they choose, but it is not a legal requirement.

Potential Risks for Misclassification

Classifying an employee as a contractor to avoid workers' compensation can lead to penalties, back‑paid premiums, and liability for workplace injuries. Employers should use the IRS, state, and Department of Labor guidelines to determine proper classification.

When Workers' Compensation Applies to Contractors

Some states allow employers to offer workers' compensation to contractors who work on a site under direct supervision or who are required to follow the employer's safety protocols. In those cases, a separate policy or a subcontractor workers' comp program may be necessary.