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Workers Compensation Payroll audit - does your insurer want to include independant contractors earnings?

Worker's Comp Audit Of Independent ContractorsOur workers comp insurance company is stating that we should be charged workers comp insurance for independant contractors, who receive a 1099, if they do not provide proof of having their own workers comp policy coverage.  Is anyone else experiencing this?

Thank you


Topic Expert
Barrett Peterson
Title: Senior Manager, Actg Stnds & Analysis
Company: TTX
(Senior Manager, Actg Stnds & Analysis, TTX) |

This if a fairly common issue, on which your carrier may not be very flexible.

Topic Expert
Wayne Spivak
Title: President & CFO
LinkedIn Profile
(President & CFO, |

An insurer for a client of our tried this. The contracts we had stipulated that we (the purchaser of the services) were not liable for and did not provide Workers Comp, etc.

That stopped them in their tracks.

Lynn Zeiner
Title: Business Manager
Company: DME Alliance, Inc
LinkedIn Profile
(Business Manager, DME Alliance, Inc) |

Our insurance carrier requires this as well. Unless we hold a Certificate of Insurance for a 1099, we are must include they payments similar to payroll for our regular employees.

Scott Cadora
Title: Vice President
Company: Pinnacle Business Solutions, Inc.
LinkedIn Profile
(Vice President, Pinnacle Business Solutions, Inc.) |

It's standard practice for insurers because current statutes places the responsibility on you, the employer, to ensure that the 1099 IC's have WC coverage. Since most 1099's don't have a WC policy, the standard is to include their compensation in the WC premium calculations. If you can document that the 1099's do have WC coverage in place (usually via a COI), then the insurer will likely grant an exemption. But ultimately it's in your best interest to ensure that the 1099's have some coverage. Otherwise you'll be responsible if they are injured.

BTW - having a contract stating that you aren't liable may not help you since the legal standard is that the employer is ultimately responsible to ensure coverage is in place, whether the individual is a W-2 or 1099. Some states are much more restrictive on the liability of employers.

Aaron Gerstman
Title: Financial Consultant & Advisor
Company: Gerstman Consulting
(Financial Consultant & Advisor, Gerstman Consulting) |

Check with a labor attorney for your state's law on this issue. Specifically ask what liability your company would have if a 1099 contractor who does not have W.C. coverage were injured while performing services for your company. Answer may change depending if injury occurred on company property (including anywhere instructed to be) or not. Ask about liability if a contractor were injured while working for you in his or her own office. Generally for any condition where your company would be liable, the contract amount should be included in you payroll audit. And make certain that your W.C. policy includes language for contractors.

Audrey Kwast
Title: Accounting/HR Administrator
Company: Padre Associates, Inc.
(Accounting/HR Administrator, Padre Associates, Inc.) |

This can be confusing as an owner of a company does not have to carry wc on themselves in the State of California. Often an IC is the only "employee" of the company and does therefore not carry a wc policy. I have had some success during a wc audit by pointing this out.

Topic Expert
Christie Jahn
Title: CFO
Company: Prime Investments & Development
(CFO, Prime Investments & Development) |

We run into this as well. What we started doing was requiring it up front. If we wanted to use a new vendor a W9 and COI were required before payment. As long as he made that clear in the beginning of the relationship we didn't have issues. With that being said Wayne I noticed your comment said if you stipulate that you are not liable, your insurance company didn't force the issue? I may have to check into that.


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