Do I Need Workers' Compensation?
by Kerry Hongisto

Do I Need Workers’ Compensation?


I receive many inquiries from businesses asking if they need to purchase workers’ compensation coverage. In Michigan, private employers are required to purchase workers’ compensation if there is one full time employee or three part time employees. Agricultural employers must purchase it if they employ 3 full time employees. Households with domestic workers must purchase it if they have one full time employee and all public employers are required to purchase workers’ compensation.

I’m often asked if it is still required if they hire “independent contractors” which receive a 1099 versus a traditional employee who receives a W-2. The answer to that is, it depends!!   Generally speaking, you cannot just call yourself an independent contractor. An independent contractor is one who has a separate business and holds themselves out to the public as a business. If someone only works for one business and their schedule is directed by that one business, that person would probably be considered an employee for workers’ compensation purposes.

In Michigan, a sole proprietor working in their business is not considered an employee, and is not eligible for workers’ compensation benefits. Therefore, they are not required to purchase workers compensation unless they have employees which meet the requirements above. However, if you have any employees, no matter what type of business entity you have set up, and that employee is injured during the course of employment, you could be held responsible even if you were not required to purchase workers’ compensation. Basically, if you hire someone to do work for you and they are not operating as their own independent business you have a workers’ compensation exposure, even in your own home! Keep in mind, I am not an attorney and cannot interpret the workers’ compensation law, but these are just a few things to think about as you hire people to do work for you.

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