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Do you need workers’ compensation for independent contractors?

As a business owner, one thing you should know if you need (or not) is workers’ compensation. If you intend to hire employees, it’s often necessary to carry workers’ compensation unless you’re going to self-insure.

Workers’ compensation is costly, but you need to have it when you have employees. If they get hurt or ill because of the work they do for you, you’ll want to have the protection of workers’ compensation to avoid a major lawsuit.

Do you need workers’ compensation if you hire a freelancer?

If you’re hiring someone who will work as an independent contractor, you don’t generally need to carry workers’ compensation for them. However, you need to be sure that you classify the individual correctly and that they are not actually an employee that you’re misclassifying as an independent contractor.

Remember, an independent contractor:

  • Offers their service as an independent trade.
  • Performs services that are not controlled by an employer (including what will be done or how it will be done).
  • Is in business for themselves and may have a contract with the client rather than an employment contract.

The rules surrounding who is or is not an independent contractor can be a little bit of a gray area, so if you’re not sure about who you’re hiring, your first stop should be to talk to someone who understands what independent contractors are and how to maintain and independent contractor-client relationship.

What do you do if an independent contractor is hurt on the work site?

If you hire an independent contractor and they get hurt while doing work for you, you should not be responsible for covering their injuries unless they were due to negligence or malicious intent. For example, if they get hurt because one of your employees pushes them down the stairs or because you allowed a piece of equipment you asked them to use to break down due to poor maintenance, then you could be held responsible. You wouldn’t need to carry workers’ compensation, but you could find yourself at the wrong end of a lawsuit.

Before working with anyone, think closely about the protections you need and how to avoid serious risks of lawsuits.

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