If you’re hurt on the job but you’re not actually an employee, you have a few options. Learn about workers’ comp when you’re a gig worker or independent contractor.
Workers’ compensation insurance (also known as “workers’ comp”) compensates people for work-related injuries. Workers’ comp benefits can pay for medical costs, replace lost wages and pay other expenses.
Each state has its own workers’ compensation laws. Workers’ compensation benefits will differ depending upon where you live, but the basic idea is similar across the United States.
In most states, workers’ comp insurance companies are selected by employers. These companies then provide the coverage to their employees. After you get hurt on the job, you have to file a claim with the insurance company.
We see independent contractors in all areas of life. Tradespeople, disc jockeys, artists, rideshare drivers, writers, and business consultants can all be independent contractors.
Companies only have to provide workers’ compensation insurance to employees. So, independent contractors need to know their options and obligations in the world of workers’ compensation.
Independent contractors may end up purchasing workers’ comp coverage for themselves. They may arrive at a different understanding with the companies they work for. But the one thing they cannot do is ignore the issue until a work-related injury happens and it’s too late.
This article will examine the legal situation for independent contractors. We’ll also take a look at the workers’ comp policies for independent contractors. Finally, we will look at a possible legal advantage of independent contractors.
What Is an Independent Contractor?
First, ask whether you are actually an independent contractor under workers’ compensation laws. Although the answer may seem obvious, legal requirements on this point can be unclear.
Employers must buy workers’ compensation coverage for employees. You should double-check that you’re not an employee. You may find that, despite the label applied to you, the company has misclassified you. If you are an employee, the company should bear the cost of workers’ comp coverage.
Here’s the difference between the two roles.
- Is in the service of their employer, who gets to direct their activities throughout the day.
- Usually gets an Internal Revenue Service Form W-2.
- Has their work process and schedule controlled by the company.
An independent contractor:
- Provides a specific service for a fee.
- Usually gets an Internal Revenue Service Form 1099.
- Controls when and how much they work. The company only has control over the final result of the work.
This distinction is a big controversy in California. In late 2020, courts there held that Uber drivers were likely misclassified as independent contractors. While the case is still pending, this decision could serve as a model for other states.
If these rulings stand and take hold in other states, things could change. It would have a significant effect on workers’ compensation insurance across the country.
Currently, in most states, you are an independent contractor if you have more control.
Some factors determining “control” are as follows:
- Is the worker providing a special or unique service to the company?
- Is the worker using their own tools to do the job or are those tools provided by the company?
- Is the worker’s role over a certain period of time or indefinite?
- Is the service provided by the worker outside of the normal business operations of the company?
No one factor is determinative. But if they tend to show less control by the worker, it’s more likely that the worker is an employee. In that case, the company should provide workers’ comp insurance.
Misclassifying employees as independent contractors is a serious offense. It can result in criminal penalties for hiring companies. So before you have to deal with an injury on the job, make sure that you’re correctly classified.
Coverage for Independent Contractors
Assuming you are an independent contractor, look at what your state law requires.
While state law usually makes it a crime for employers not to pay workers’ compensation insurance, independent contractors don’t typically face the same kinds of penalties as employers. (One notable exception to this rule is that if you hire subcontractors, you may be required to purchase insurance for your subcontractors.)
In other words, if you are an independent contractor without employees or subcontractors, you are probably not required to buy a workers’ comp policy.
But don’t stop your analysis there. There are compelling reasons for independent contractors to have their own workers’ compensation coverage. As you might expect, not having insurance coverage can severely cost you.
Your health insurance may not cover injuries you receive in the course of your work. Courts that have considered the issue have ruled that health insurance plans may properly exclude work-related injuries from coverage. That could leave you paying a fortune in medical bills.
Without a workers’ compensation insurance policy, you may run into trouble. You could find yourself injured with no insurance to pay for out-of-control medical expenses or lost wages. Buying your own workers’ comp policy is an especially wise idea if you work in a high-risk or dangerous industry.
The process for submitting a workers’ compensation claim as an independent contractor is like that of an employee. The chief difference is the absence of an employer paying for your policy.
Because there is no company employer to help you with information for your workers’ comp claim, you are solely responsible for providing all information and complying with the duty to cooperate with your insurance company.
This means that when the carrier needs any information for its investigation, you must provide that information as soon as possible. Otherwise, you risk a denied claim or lost coverage.
Another Option: A Lawsuit
There is one major legal difference between employees and independent contractors that you may be able to use to your advantage. As a non-employee, you may be able to sue the company you are working for.
Under workers’ comp laws, employers are usually immune from lawsuits for injuries. The Nevada statute, for example, states that the worker’s comp claim process is “exclusive.”
In practice, this means that an injured employee can only recover compensation through the workers’ comp system. They may have to undergo treatment by the insurance company’s or employer’s chosen doctor. They can’t file a separate lawsuit against their company for their on-the-job injury.
Independent contractors are not typically subject to this same limitation. This means that you may have a valid lawsuit that an employee wouldn’t be able to bring.
Note that if you purchase your own workers’ comp policy and make a successful claim, you will probably not be able to successfully bring a lawsuit. Most judges would likely see this as an attempt at trying to get compensated twice for the same injury. Because this is at odds with basic fairness and the purpose of workers’ compensation laws, you would likely lose this fight.
Of course, choosing to pursue a personal injury claim or file a lawsuit is a serious decision. It can involve a significant investment of time and great expense. But the ability to make a claim and against a company or its insurer directly is a unique tool. It can help independent contractors who can’t pursue workers’ compensation claims.
If this is a route you’re interested in, talk to a lawyer. You should speak with a qualified personal injury attorney to discuss your case. They will be in the best position to weigh your options with you.
Stay Safe and Keep Working
Independent contractors and gig work are here to stay. The amount of personal freedom this provides is a good thing, but we need to make sure that this freedom doesn’t come at the cost of our health or peace of mind.
If you or a loved one has suffered an injury while working as an independent contractor, take action. Both workers’ comp claims and lawsuits have legal deadlines. Speak with a qualified personal injury attorney in your state for a free consultation and case evaluation.
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