If your California workers are paid on a 1099 as independent contractors, whether you need workers compensation for them depends on whether they are truly independent, not on the form. California uses a strict three-part test, the ABC test, and it treats a worker as an employee unless you can prove all three parts. If a worker who should have been an employee gets hurt while you carried no coverage, you are exposed to penalties and a lawsuit, so the label alone settles nothing.
Who this is for: California business owners, especially in construction and the trades, who pay some or all of their workers as 1099 independent contractors.
The short version
- A 1099 form does not decide the question; California presumes a worker is an employee until proven otherwise.
- California decides who is really a contractor with a strict three-part test (the ABC test) that has applied to workers comp since July 1, 2020, and you have to prove all three parts.
- If a worker is really an employee, you must carry coverage for them from day one.
- Hiring an unlicensed subcontractor can make that sub and its workers your employees for comp by law.
- A general contractor can be on the hook for an uninsured subcontractor's injured workers.
How California decides who is really independent
California does not use a loose right-of-control checklist for comp. Under the ABC test, a worker is presumed to be your employee unless you can prove all three of the following: (A) the worker is free from your control and direction in doing the work, in the contract and in fact; (B) the work is outside the usual course of your business; and (C) the worker is customarily engaged in an independently established trade or business of the same nature as the work. Miss any one part and the worker is an employee you must cover. A narrow set of licensed professions and genuine business-to-business relationships are judged under an older, multi-factor test instead, but most trade and labor roles fall under the ABC test.
Employee or independent contractor under the ABC test
| ABC test part | Points toward independent | Points toward employee |
|---|---|---|
| A: Control | Worker controls how and when the work is done | You direct the details and schedule |
| B: Outside your usual business | The task is not what your business does | The work is your core service |
| C: Independent trade | Worker runs their own established business | Worker works only for you |
| Result | May be a true contractor | Treated as an employee you must cover |
The construction trap
Construction has an extra rule that catches uninsured hirers. If the work requires a contractor license and your subcontractor is not licensed, California treats that subcontractor and its workers as your employees, which makes you the responsible employer for their injuries. Separately, a general contractor that hires a subcontractor who fails to carry comp can be held liable as the statutory employer for the sub's injured workers. So confirming that every sub is both licensed and insured is not paperwork, it is what keeps their injuries from becoming your uninsured claim.
A Bakersfield example
Illustrative, not a quote. A Bakersfield general contractor uses several 1099 crews and assumes the forms settle the question. On one job he supplies the tools, sets the daily schedule, and directs exactly how the framing is done, so the crew fails part A of the ABC test, and one of them is unlicensed. When a framer falls and is hurt, the framer is treated as the GC's employee, and because the GC carried no coverage for that crew he faces penalties and a civil claim with the usual defenses removed. Going forward he confirms every sub is licensed and insured, and asks us to set up a policy so his own exposure is covered.
Real questions California owners ask
Do I need workers comp for my 1099 contractors in California?
It depends on whether they are truly independent. California presumes a worker is an employee unless you can prove all three parts of the ABC test. If they are really employees, you must carry coverage for them.
How does California decide if my 1099 worker is really an employee?
It uses the ABC test. The worker is an employee unless you prove they are free from your control, do work outside your usual business, and run their own independent trade. All three parts must be met.
Does a signed 1099 or contract make someone a contractor?
No. A 1099 and a written contract are not enough. If you cannot prove all three parts of the ABC test, California treats the person as an employee no matter what the paperwork says.
My worker sets their own hours and uses their own tools. Doesn't that make them a contractor?
Not by itself. California does not decide this on a control checklist. It uses the strict ABC test, so a worker who sets their own hours and tools is still your employee unless you can also prove the work is outside your usual business and they run their own independent trade.
What happens if I hire an unlicensed subcontractor?
If the work requires a contractor license and the sub is unlicensed, California treats that sub and its workers as your employees. You become the responsible employer for their on-the-job injuries.
Can I be liable for my subcontractor's injured workers?
Yes. A general contractor that hires a sub who fails to carry comp can be held liable as the statutory employer for the sub's injured workers. Confirming each sub carries coverage protects you.
How do I protect my business when I use 1099 crews?
Confirm each worker truly passes the ABC test, require subs to be licensed and to carry their own comp, and keep your own policy in place so a misclassified worker's injury does not fall on you uninsured.
Why California owners choose Morrow
- We shop the right market for you. In California you buy workers' comp on the open market from any licensed private carrier, with the State Compensation Insurance Fund competing alongside them and standing as the insurer of last resort, so we can shop your rate freely and still have a guaranteed fallback for hard-to-place accounts.
- We catch pricing mistakes. Your price depends heavily on the category your work falls into for pricing (the class code). Put people in the wrong category and you overpay for years. We review your payroll and classifications before you buy.
- Proof of coverage, fast. Need a certificate (proof of coverage) for a general contractor or a landlord before Monday? We turn those around the same business day for most carriers.
- We help lower the score that drives your price. Insurers give you a score based on your past claims that raises or lowers your cost (the experience modification rate). We review it each year, flag errors, and connect you with return-to-work and safety resources that bring it down.
- Real people when a claim happens. When someone gets hurt, we stay involved through the life of the claim, not just at renewal.
Related California guides
Every California business is set up a little differently. These companion guides answer the same question for other situations, plus the national explainers behind the terms used here.
- Business insurance in California (start here)
- Workers comp: the owner's overview
- I own an LLC: do I need workers comp?
- I'm a sole proprietor: do I need workers comp?
- I own a corporation (C-corp or S-corp): do I need it?
- We're a partnership: do we need workers comp?
- We're a nonprofit: do we need workers comp?
- Only part-time or seasonal staff: do I need it?
- I only employ family: do I need workers comp?
- Remote or out-of-state staff: do I need coverage?
- What happens if I don't carry workers comp?
- How much does workers comp cost?
- How do I get workers comp (even if turned down)?
- What insurance do I need for a contractor license?
- Workers compensation insurance, explained
- What workers comp costs (national guide)
- Do I need workers comp for 1099 contractors?
- What is a ghost workers comp policy?
- California general contractor workers comp
This guide is general information, not legal advice. California rules and penalty amounts can change, so verify current requirements with California Division of Workers' Compensation (DWC), a division of the Department of Industrial Relations (DIR) or a licensed advisor before you rely on them. Last updated: July 2026.