Can an Independent Contractor Get Workers’ Comp Benefits?

Got a side gig? You’re not alone. In fact, according to the Government Accountability Office, more than 40% of the population falls into the “contingency worker” category. And the U.S. Federal Reserve estimates that 30% of adults do at least five hours of gig work per month. But for many people, gig work isn’t just a side hustle, it’s their main moneymaker. This is especially true for the more than 10.6 million independent contractors out there working hard, but not considered “employees.”

In recent years, the gig economy has proliferated thanks to companies like Uber, Lyft, DoorDash, Instacart, and Amazon.  But what does that mean for those individuals hurt on the job who technically don’t have one employer? Can they still qualify for workers’ comp benefits? The answer is — it gets really complicated.

Are Gig Workers Considered Employees or Independent Contractors?

Not all gig workers are independent contractors. Not all independent contractors are gig workers. But in most cases, independent contractors are not employees.

So how the heck can you figure out which category you fall into? The easiest way to know is that independent contractors typically file a 1099 to receive payment. If you’re getting a W-2 at tax time, you’re an employee.

Additionally, most independent contractors supply their own tools and equipment and they don’t receive a salary.

Another legal test that 33 states now apply to determine independent contractor versus employee status is the ABC test. Emanating from a California supreme court ruling, this test says workers are employees unless they meet all the following criteria:

A. The worker is free from control and direction in performing their job.

B. The worker is performing services outside the usual course of business for the hiring individual.

C. The worker is routinely engaged in an independently established trade/occupation/business of the same nature as the service they perform.

If a hiring entity can prove these three things, then an individual working for them is an independent contractor.

This distinction is important when determining if you qualify for workers’ comp through the company you’re working for.

Can I Get Workers’ Comp Benefits as an Independent Contractor?

If you are definitely an independent contractor paid by 1099, generally the answer is no. You cannot qualify for workers’ comp benefits.

But where things get murky is that some employers misclassify gig workers as independent contractors when they should be employees. Employers may do this to avoid paying unemployment insurance, workers’ comp premiums, federal minimum wages, and other employee benefits.

This is why there have been many lawsuits from gig workers in recent years questioning employee status. This new non-traditional workforce continues to evolve, and workers’ comp laws are evolving alongside it.

Think you may have been wrongly classified as an independent contractor based on the ABC test? Then you should definitely report any workplace injuries to whomever hired you. If they balk and say you’re a contractor and they owe you nothing, you may wish to consult a lawyer.

An experienced workers’ comp lawyer can help evaluate your case in line with your state’s prevailing laws. Most workers’ comp lawyers work on contingency as well, so you pay nothing unless you win your case.

Do Independent Contractors Need to Get Their Own Workers’ Comp Insurance?

While laws vary, most states require that companies with even one employee must carry workers’ comp insurance.

But what if you are your only employee as an independent contractor? While the majority of states don’t require you to buy workers’ comp insurance as a sole proprietor/independent contractor, some do! Especially if you work in construction.

The best bet is to check your state’s workers’ comp rules. Get the most up-to-date info by contacting your state’s workers’ comp officials through the Department of Labor.

However, even if your state doesn’t mandate that independent contractors carry workers’ comp, there are reasons you might consider it. To begin with some companies require that any independent contractors working for them carry their own workers’ comp insurance. This limits the company’s liability if a contractor experiences injury on the job. As a result, independent contractors will sometimes encounter contracts that require carrying workers’ comp insurance as part of it!

Additionally, many independent contractors don’t realize that having health insurance isn’t always enough. If injured on the job, the health insurance company of an independent contractor may refuse to cover claims. It is vitally important that independent contractors check their health insurance to see what is covered. Many policies exclude work-related injuries.

Another reason for contractors to get insurance is if an injury forces you to take time off work. In that case, workers’ comp benefits can supplement some of your missing wages. Workers’ comp insurance can run for as low as $20/month for independent contractors. So, it’s a smart business expenditure to consider.

The Future of Gig Work and Workers’ Comp

The gig economy is clearly here to stay. And as it expands and evolves, there may be more independent contractors who find their classification changes to employee.

This is especially true considering that gig work includes temp work, freelancers, contractual jobs, and more. And gigs may last an hour or a year. There is so much variability that it can be hard to know what rights you have.

Just remember, if you’re injured on the job, it’s important to explore your options. And if you’re unsure of your status, consulting with a workers’ comp attorney can help you find clarity. Because it’s a gig, gig world out there!

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