MANDATORY Workers Compensation Insurance for a 1099?

The Coffee Shop
1

I have a small company I am a 1099 of and their insurer (Hartford) says they need to pay workers compensation insurance for me. There is no way I could possibly be considered an employee, I am a 1099. I have been a 1099 for many companies over the years and I have never once been asked something similar and I am really confused. Since I am not directly talking with the insurance people I really don’t have a good handle except for asking questions. Here is what the company said me from an insurance agent I believe:

"
This issue arises not only in California but also all over the nation because many court cases have confirmed that 1099 classification made by an employer (like you) is not a sufficient factor to exclude the employer’s contractors from its worker’s compensation insurance coverage. In other words, if your 1099 classification is not agreed by your insurance company, your insurance company will ask you to submit your 1099 contractors’ own worker’s compensation coverage certificate or to include your 1099 contractors in your insurance policy if your contractors do not have their own insurance.

As I explained to you, your insurance company believes that contractors NOT ENTIRELY INDEPENDENTLY helped your biz operation and thus they should be included in your policy. You may argue against the insurance company’s decision (opinion) by hiring an insurance or labor attorney or by filing an appeal to the insurance company, but it would cost to you.

That’s why I recommended you advise your contractors to set up their own S-corp not only to avoid this issue easily but also to help their income tax burden. This solution is adopted by many of contractors nowadays."

Does anyone have an experience with this? The only thing that would make sense is if somehow they are classifying me as an employee, which I am definitely not.

2

Isn’t this the same thing as the lyft/uber lawsuits? It sounds like Hartford is Doing some CYA review to make sure who they are covering is paying for everyone that they should be.

3

Isn’t this the same thing as the lyft/uber lawsuits? It sounds like Hartford is Doing some CYA review to make sure who they are covering is paying for everyone that they should be.

What is the latest on this. I see some stuff from 2016 but it didn’t even touch on the employee/contractor debate in the settlement.

4

I’m not sure what you are asking, but, I am familiar with this area.

Most states – especially California – require all employers carry workers compensation insurance for all employees. This requirement does not apply to independent contractors. However, the test in CA for “independent contractor” is different than the IRS test for “independent contractor.” Many, many people classified as an independent contractor and paid on a 1099 do not actually meet the criteria for such designation. So, if you, for example, are injured at work, do not have workers compensation coverage, and are found to not meet the criteria as an independent contractor, the company is on hook for the medical expenses. That means the company – not the company’s insurance carrier – must pay your medical expenses.

Thus, many companies that employ independent contractors require the contractors to carrier their own WC policy. Depending on the state, this isn’t that expensive. In many states, the cost is $800-1200/year. But, typically get back around $600 with your tax return.