If your business hires independent contractors, are they truly independent, or could they be "covered workers" under Washington's workers' compensation law? The answer matters more than many owners realize. Getting it wrong can lead to unexpected penalties, back premiums, and even lawsuits.

In Washington, every worker is a covered worker for workers' compensation purposes unless they clearly fit a narrow legal exception or they are considered an Excluded Employment within RCW 51.12.020. That means simply labeling someone an "independent contractor", or even having a signed contract that says so, does not automatically exempt you from paying premiums.

A few things surprise business owners most often:

- The same person can be an independent contractor on one job and a covered worker on another. Each contract has to be evaluated on its own.

- Someone can be an independent contractor for federal tax purposes and still be a covered worker under Washington workers' comp law.

- Other agencies, like the Employment Security Department and the IRS, apply their own separate rules.

Tests to Determine Coverage

Start with the "personal labor" test. Ask whether the contractor brings more than just their own labor to the job. If they bring their own crew (and you aren't directing that crew) or bring heavy, costly specialized equipment, they generally aren't your covered worker. Bringing a chainsaw, ladders, or standard power tools doesn't clear this bar.

If the personal-labor test isn't met, apply the 6-part test (7 parts for construction contractors). To be exempt, the contractor must meet all of these:

1. They work free from your direction and control

2. their business is genuinely separate from yours

3. They run an established independent business or maintain a qualifying principal place of business

4. They file a schedule of business expenses with the IRS

5. They hold the required state registrations, licenses, and an open Department of Revenue account

6. They keep their own books and records

Construction contractors (7) must also carry valid contractor registration or an electrical contractor license.

If you set the hours, keep timesheets, direct the method of work, or supervise how the job gets done, that indicates a covered-worker relationship, regardless of what the contract may state.

Safety Applies No Matter What

Even if your contractors pass every test above, don't assume you're off the hook for safety. The definition of "employee" differs across Washington's safety, workers' comp, and wage-and-hour laws. Someone who isn't your covered worker for premium purposes may still be your employee under safety and health rules. The bottom line: keep your job site safe for everyone, which includes maintaining a written safety program tailored to your business's hazards.

Where to Get Help

L&I offers free, confidential coverage determinations that won't trigger an audit or assessment. Call Workers' Comp Coverage Determinations at 360-902-6868. For no-cost safety consultations, call 1-800-423-7233 or visit www.Lni.wa.gov/SafetyConsultants. The full guide is available at www.Lni.wa.gov/go/F101-063-000.

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