Many times after we present the client with a quote for workers’ compensation insurance with all the different codes they will be using for the next year and what their rates will be, they will say, I will just hire independent contractors and simply 1099 them, therefore, I won’t have to pay for any AZ Workers’ Compensation insurance. Please be advised, it is not that simple. Workers’ Comp carriers have very strict guidelines on what constitutes an independent contractor versus an employee. Here are some guidelines on what constitutes an employee and what constitutes an Independent Contractor:
1) Their relationship is one that is continuous with the employer.
2) They can quit at any point and will not face any liability for doing so.
3) Their schedule is set about where, how, and when they go to work.
4) All their materials and tools are supplied by the employer.
5) All their training is supplied by the employer
1) They maintain their own tools; also, they can supervise, hire, and pay assistants.
2) They can set their own work schedule and work when they decide it’s best for them.
3) The work they are doing for you is the same as they perform for others.
4) For the work they perform, it can make them money or lose them money.
5) They have a business license.
Now, please understand that these are only guidelines, and each worker’s comp carrier will have their own rules with regard to how independent contractors are classified. We suggest that you reach out to the carrier and request a clear set of guidelines from them regarding the use of independent contractors, so your company will not have any surprises when you receive your worker’s compensation premium invoices.