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Do I Need to Insure My 1099 Contractor?

The simple answer to this question is: it depends. Before you can answer it fully, you need to understand that the difference between W2 and 1099 employees is not defined by the paper they sign when the agree to perform services for you.

When Does a 1099 Status Make Sense for Healthcare Workers?

Consider the following factors before accepting or declaring 1099 employment status:

• Workers who supply their own equipment and materials, tools and materials
• The work temporary in nature
• Workers who can be discharged at any time and can choose not to work without losing employment
• Workers who control their own hours and where work is performed (if applicable)

If you hire a low wage work, such as a certified nurse’s aide, you probably decide their work days and hours and tell them the kind of work needed. Some professionals, such as registered nurses and doctors may work for an agency and contract certain jobs. However, the nurse or doctor will determine how the job is done. These individuals also make double, triple or higher multiples of what a CNA takes home.

Are Independent Contractors Covered by Your Workers Compensation Policy?

Typically, 1099 contractors aren’t eligible for workers’ compensation coverage. However, some employers misclassify independent contractors to avoid workers’ comp expense and payroll taxes. If a worker is injured, employers sometimes try to deny responsibility for the claim. However, whether an employee wins the case usually goes beyond the paperwork.

Independent contractors are paid by the job, whereas, employees receive hourly wages or a salary. Another way to determine independent contractor status from the worker’s comp point of view is whether the home care worker is closely controlled by the employer. For example, a Nurse Practitioner is highly skilled, performs a single function they control and, if they are independent contractors, usually work for two or more companies.
On the other hand, companions and CNAs tend to work for a single company who controls their hours and wages and provides instruction on the work to be performed

General Liability Insurance

If you hire a 1099 contractor who meets the criteria listed above, then, generally speaking, they won’t be covered by your general liability insurance for property damage or bodily injury. If a healthcare worker representing your business injures a client or causes property damage while on the job, it can be an issue if the case goes to court. To protect your business, make sure that CNAs and lower wage earners are classified appropriately. You can also ask independent contractors carry their own liability insurance and verify their coverage prior to hiring them.

Taking it To Court

Worker compensation laws vary from state to state. Generally, independent contractors aren’t eligible for worker’s compensation. So, employers don’t have to provide it. However, if the 1099 contractor doesn’t have insurance and gets hurt at your business, they can sue for damages.
Also, many employers improperly class employees as independent contractors because they don’t want to pay payroll taxes and workers’ comp premiums. If a claim is filed, the courts and state compensation boards are more likely to turn to the deeper pockets of a corporation to pay for damages.

Tax Implications

According to the IRS, an individual qualifies as an independent contractor if he controls the results of the work, when and how it will be done. The earnings of an employee are reported on a W2 form with full FICA (social security tax and Medicare) tax withheld. Independent contractors get a 1099 stating their earnings for a particular company, but are responsible for saving and paying social security and Medicare taxes.


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