In Illinois, calling a worker 1099 does not decide whether you need workers' comp; what matters is whether the state would treat that person as an employee. For most industries Illinois uses the common-law right-of-control test, which asks who controls the manner and method of the work, not the label on the paycheck. In construction, a stricter three-part test applies under the Employee Classification Act (820 ILCS 185). If your workers are really employees, coverage is required from the first one.
Who this is for: Illinois owners who pay workers on a 1099 and want to know if they still need coverage.
The short version
- A 1099 label does not settle it; Illinois looks at the real working relationship.
- For most trades, what matters is who really runs the work: if you set the hours, supply the tools, and can fire them, Illinois treats them as your employee no matter what the 1099 says.
- Construction uses a stricter three-part ABC test under the Employee Classification Act (820 ILCS 185), enforced by the Illinois Department of Labor.
- If your workers are really employees, coverage is required from the first one.
- A general contractor can owe benefits for an uninsured subcontractor's injured workers (820 ILCS 305/1(a)(3)).
How Illinois decides employee vs contractor
Illinois does not let the label control. For most industries, whether a worker is an employee turns on the common-law right-of-control test (Roberson v. Industrial Comm'n): the central question is whether the hiring party has the right to control the manner and method of the work, not just the result. Courts weigh several factors, including who supplies the tools, how the worker is paid, and the right to fire, with control the most important. Construction is different: under the Employee Classification Act, a person doing work for a construction contractor is presumed an employee unless the contractor proves all three parts of a strict test, that the worker is free from control, does work outside the contractor's usual business, and runs an independent trade. Illinois does not apply that three-part test outside construction, so do not assume it covers your industry.
| Signal | Points toward employee | Points toward contractor |
|---|---|---|
| Control over how the work is done | You direct the methods and schedule | They control their own methods |
| Separate business | They work only for you | They run a real business serving the public |
| Tools and helpers | You supply them | They bring their own and hire their own help |
| How they are paid | Hourly, like staff | By the job, at their own risk of profit or loss |
The subcontractor trap for contractors
Even if a worker really is an independent contractor, contractors face a second exposure. Under 820 ILCS 305/1(a)(3), a contractor or principal that hires a subcontractor who is not insured can be liable to pay benefits to that sub's injured workers, and can then seek to recover from the defaulting sub. Trying to force people who are really employees to pose as contractors carries its own liability, and in construction the misclassification law adds penalties on top. The clean fix is simple: collect a current proof of coverage from every subcontractor before they start, and know that this general-contractor exposure is automatically covered by a standard comp policy.
A Chicago example
Illustrative, not a quote. A Chicago general contractor treats its framing crew as 1099 subs, but the contractor sets their hours, supplies the tools, and they work only for this one builder. Under the construction test, those workers are presumed employees, so they need to be covered from the first one. When the contractor also hires a separate, independent drywall sub, it collects that sub's proof of coverage first, so an uninsured sub's injury cannot land on the contractor under 820 ILCS 305/1(a)(3). We sort out the classifications and place the policy. See our workers comp for contractors page.
Real questions Illinois owners ask
If my workers are 1099, do I still need workers comp in Illinois?
Maybe. The 1099 label does not decide it. If Illinois would treat the worker as an employee under its right-of-control test, or the stricter construction test, they generally need coverage.
What test does Illinois use for contractor status?
It depends on the industry. Most industries use the common-law right-of-control test, while construction uses a stricter three-part ABC test under the Employee Classification Act.
Does that stricter construction rule apply to every business?
No. The three-part construction test applies only to construction under the Employee Classification Act. Other industries use the common-law right-of-control test for workers' comp.
Can I be liable for a subcontractor's injured worker?
Yes. Under Illinois law, a contractor who hires an uninsured subcontractor can be liable to pay benefits to that sub's injured workers, and can then try to recover from the sub.
How do I protect myself when I hire subs?
Collect proof of coverage. Get a current certificate of workers' comp from every subcontractor before they start, so an uninsured sub's injury does not become your responsibility.
Can I just call everyone a contractor to avoid coverage?
No. Illinois decides status by the real relationship, and misclassifying employees as contractors carries its own liability, with extra penalties in construction.
Does my comp policy cover the subcontractor exposure?
Yes. The liability you can pick up for an uninsured sub's injured workers is automatically covered by a standard workers' comp policy issued to your business.
Why Illinois owners choose Morrow
- We shop the right market for you. In Illinois you buy workers' comp on the open market from any private carrier licensed in the state, because Illinois has no state fund; if no carrier will take you, the Illinois Workers' Compensation Assigned Risk Plan (the assigned-risk plan) is the guaranteed fallback, so we can shop your rate freely and still keep a backstop for hard-to-place work.
- 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 Illinois guides
Every Illinois 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 Illinois (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?
- Illinois contractor workers comp
This guide is general information, not legal advice. Illinois rules and penalty amounts can change, so verify current requirements with the Illinois Workers' Compensation Commission (IWCC) or a licensed advisor before you rely on them. Last updated: July 2026.