Who Is Usually Excluded?
State workers' compensation is designed for employees who suffer job‑related injuries or illnesses. It generally does not cover those who are not considered employees under the law. The primary groups excluded are:
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- Independent contractors and freelancers who provide services on a self‑employed basis.
- Self‑employed individuals who do not pay into the state's workers' comp system.
- Employees who work for a company that has opted out of the state program (often in certain industries or small businesses).
- Owners or partners in a business that are not classified as employees.
Why the Exclusion Exists
Workers' compensation is funded by employer payroll taxes or premiums. If an individual does not contribute to this pool, the state has no financial basis to provide benefits. Additionally, the legal definition of an employee varies by state, and many statutes explicitly carve out independent contractors.
Impact on Independent Contractors
Because independent contractors are not covered, they must rely on other safeguards:
- Commercial general liability insurance may cover injury claims, but it is not designed to replace workers' compensation.
- Professional liability or occupational health plans can provide limited medical coverage.
- Some states offer optional workers' comp for contractors, requiring them to pay premiums.
Self‑Employed and Small Business Owners
Owners who do not file payroll taxes for themselves are excluded. Small businesses with fewer than a threshold number of employees sometimes have the option to self‑fund workers' comp or purchase a private plan.
Alternatives and Mitigation
Individuals in excluded categories should:
- Purchase private injury protection plans that mimic workers' comp benefits.
- Maintain comprehensive health insurance to cover medical expenses.
- Consider purchasing a business liability policy that includes an "injury" rider.
- Explore state‑specific programs that provide limited coverage for self‑employed workers.