The single most expensive misunderstanding in contracting — and the one-line rule that prevents it.
Workers compensation · Updated September 2026
The reasoning sounds airtight. They are 1099. They are not my employees. I do not owe workers compensation on them.
At audit, the carrier asks a different question: did this subcontractor carry their own workers compensation coverage for the period they worked for you? If you cannot prove it, the amounts you paid them can be added to your payroll and rated at your class. On a year with heavy subcontracting, that single issue can produce an audit bill larger than the original premium.
Missouri also recognizes that a general contractor can become responsible for an uninsured subcontractor's workers compensation exposure — meaning an injured worker of an uninsured sub can end up as a claim on your policy, not just a premium charge.
Issuing a 1099 is a tax reporting choice. It does not by itself make someone an independent contractor.
Missouri looks at the actual working relationship, using the IRS factors as a guide: who directs when, where and how the work is performed; whether the worker sets their own hours; how payment is structured; who supplies tools and materials; whether expenses are reimbursed; whether the relationship is continuing; and whether the worker offers services to the general public.
A worker who shows up at your shop every morning, uses your tools, follows your schedule and works only for you is an employee, whatever the paperwork says. Treating them as a contractor creates exposure at audit, with the state, and with the IRS at the same time.
The rule that prevents nearly all of this is simple enough to put on a wall: no certificate, no work.
Collect a certificate of insurance from every subcontractor before they start. Check that it shows workers compensation coverage, not just general liability — the two are different lines and a GL-only certificate proves nothing about comp. Confirm the policy dates cover the whole period the sub is working for you, and get a fresh certificate when their policy renews.
Keep them filed with the amounts you paid each sub. That file is what an auditor wants, and producing it takes an afternoon of organization instead of a five-figure surprise.
A one-person subcontractor may not be required to carry workers compensation on himself, and often does not. That does not help you: with no coverage in place, his payments can still show up in your audit.
This is where the conversation with the sub happens before the job, not after. Some carry a policy with an owner inclusion specifically so they can produce a certificate and stay hireable. Others accept that hiring firms will add the cost. Either way, it is cheaper to establish it in advance.
Make the certificate part of onboarding a sub, alongside the W-9 and the contract. Diary expiration dates. Keep a simple spreadsheet listing each sub, their policy dates and what you paid them.
We encourage every client who uses subcontractors to adopt one rule: certificate first, work second. Before a sub starts, get a current certificate of insurance showing workers compensation coverage, make sure the policy dates cover the whole period they are working for you, and keep it on file. When their policy renews, get an updated one.
We help clients work out exactly what to collect and when, so nobody is chasing certificates months later in the middle of an audit.
If they cannot show their own workers compensation coverage for the period they worked for you, the amounts you paid them can be treated as payroll at audit and charged at your class rate. With a valid certificate on file, generally not.
No. General liability and workers compensation are separate lines. The certificate needs to show workers compensation coverage specifically, with dates covering the work.
Not by choice alone. Status depends on the actual relationship — who controls the work, sets hours, supplies tools, and whether the worker serves other clients. A 1099 does not settle it, and getting it wrong creates exposure at audit, with the state and with the IRS.
He may not be required to insure himself, but you can still be charged for his payments at audit. Sort it out before the job — many sole proprietors carry a policy with owner inclusion precisely so they can produce a certificate.
At least through the audit for the policy period in which the work was performed, and longer is better. Keep them with records of what you paid each sub.
Questions about your own situation? Call 417.623.8300 or send us your current policy. We are licensed in Missouri, Kansas and Oklahoma.
Send your current policy and we will check class codes, payroll, subcontractor exposure, your experience mod and claims history before we shop it.