It is important that you understand your requirements when employing Independent Contractors. If not, your business may be vulnerable to unexpected regulatory penalties and even lawsuits.
In Washington, every worker is presumed to be a “covered worker” for purposes of workers’ compensation coverage unless they fall into a few narrow exceptions provided by law.
If the person you hire or contract with is a “covered worker” under Washington State workers’ compensation law, you as an employer have certain legal responsibilities. You must keep accurate records, pay workers’ compensation premiums and follow all state employment laws.
If you determine you have “Independent Contractors,” they still may be considered your employee under the Washington Safety and Health Act
In order to be exempt from workers’ compensation, the following tests must be met:
- Does the contractor hire a crew of their own or are they bringing other employees? If they do, and you are not controlling their work, then the person is not your employee.
- The contractor brings employees and directs them. If you are directing or controlling the work, then yes, the individual is a covered worker and workers’ compensation coverage is required.
- Are they bringing heavy or costly specialized equipment? If you are contracting with someone who brings more than ordinary hand tools to the job and you are not directing or controlling the work, then they are not your employees.
- Are they an established business, working without your direction or control?
- You cannot supervise how the work is done.
- The individual is performing a service outside of your usual course of business.
- Does the contractor perform the service away from where you perform?
- Does the individual provide receipts or contracts showing proof of the financial obligation for their location?
- Does the individual have an established independent business that existed before you brought them on?’
- Is the individual responsible for filing a schedule of expenses with the IRS?
If you answered yes to most of these questions, then you do not pay workers’ compensation premiums but instead the Independent Contractor is responsible.
For determination of coverage for independent contractors, call Workers’ Comp Coverage Determinations at 509-324-2627 or email Determinations@Lni.wa.gov.