In Michigan, 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 work done since January 1, 2013, Michigan uses the IRS 20-factor test, a right-of-control test, applied by the state's hearing system to decide (MCL 418.161(1)(n)), and if your workers are really employees, they count toward the coverage test. So the 1099 on the paperwork is not the answer; the working relationship is.
Who this is for: Michigan 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; Michigan looks at the real relationship using the IRS 20-factor, right-of-control test, not an ABC test.
- If the state would call your worker an employee, they count toward the 3-at-one-time or 35-hours-for-13-weeks trigger.
- A general contractor can be liable for an uninsured subcontractor's injured workers (MCL 418.171).
- That means you can end up paying for a sub's injury if the sub had no coverage, so collect proof of coverage from every sub.
- A standard comp policy covers this general-contractor exposure automatically.
How Michigan decides employee vs contractor
Michigan does not let the label control. For services performed since January 1, 2013, whether a worker is an employee is decided using the 20-factor test the IRS announced, which turns on how much control you have over the work, not on whether you handed out a 1099. The state's hearing system, not the person writing the check, makes that call in a dispute. An older strand of the same law also treats someone as an employee unless they truly run a separate business, hold themselves out to the public, and are themselves subject to the Act. What Michigan does not use is a three-part ABC test, so do not assume rules from another state apply here.
| 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 MCL 418.171, a contractor or principal that hires a subcontractor who is not covered can be liable for that sub's injured workers, as if they were your own, and you can then try to recover what you paid from the sub. Trying to force people who are really employees to pose as contractors carries its own liability. 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 Warren example
Illustrative, not a quote. A Warren 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 Michigan's control test, those workers look like employees, so they count toward the coverage test and need to be covered. 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 MCL 418.171. We sort out the classifications and place the policy. See our workers comp for contractors page.
Real questions Michigan owners ask
If my workers are 1099, do I still need workers comp in Michigan?
Maybe. The 1099 label does not decide it. If Michigan would treat the worker as an employee under its right-of-control test, they count toward the coverage test and generally need coverage.
What test does Michigan use for contractor status?
The IRS 20-factor test. For work since January 1, 2013, Michigan decides employee status using that right-of-control test through its hearing system, not a three-part ABC test.
Can I be liable for a subcontractor's injured worker?
Yes. Under Michigan law, a contractor who hires a subcontractor with no coverage can be responsible for that sub's injured workers, and can then try to recover what it paid 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 work, so an uninsured sub's injury does not become your responsibility.
If a sub gets hurt and had no coverage, will my policy pay for it?
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.
Can I just call everyone a contractor to avoid coverage?
No. Michigan decides status by the real relationship, and trying to make people who are really employees pose as contractors carries its own liability under the Act.
Why Michigan owners choose Morrow
- We shop the right market for you. In Michigan you buy workers' comp on the open market from any private carrier licensed in the state, because Michigan has no state fund; if no carrier will take you, the Michigan Workers' Compensation Placement Facility (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 Michigan guides
Every Michigan 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 Michigan (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?
- Michigan contractor workers comp
This guide is general information, not legal advice. Michigan rules and penalty amounts can change, so verify current requirements with the Michigan Workers' Disability Compensation Agency (WDCA) or a licensed advisor before you rely on them. Last updated: July 2026.