If your Minnesota workers are paid on a 1099, that label does not decide whether you need workers compensation. Minnesota looks past the paperwork: for most work it applies a right-of-control test, and in construction it applies a strict 14-factor test that presumes a worker is an employee unless every factor is met. If your 1099 workers are really employees under the test that applies to you, you need to cover them, and misclassifying them to save premium can be a crime.
Who this is for: Minnesota owners who pay some or all of their workers on a 1099, including contractors, delivery and trucking operators, and shops that use freelancers.
The short version
- A 1099 does not settle it; Minnesota decides employee status by the real relationship.
- For most work Minnesota uses a common-law control test, backed by occupation rules; it is not the ABC test.
- Construction uses a strict 14-factor test, tightened on March 1, 2025, that presumes the worker is an employee unless every factor is met.
- Workers who are really employees must be covered, whatever their tax form says.
- A general contractor can be made to pay comp for an uninsured subcontractor's injured workers.
The tests Minnesota actually uses
Which test applies depends on the work. For most non-construction jobs, Minnesota uses the common-law right-of-control test, which asks whether you control not just the result of the work but the way it gets done, supported by occupation-specific rules for dozens of trades. Truck and delivery owner-operators have their own seven-part statutory test. Construction is the strict one: since March 1, 2025, a building-construction worker is presumed an employee unless they operate as a business entity and meet all 14 factors in the statute, so failing even one factor makes them an employee. Minnesota is not an ABC-test state for comp, and construction misclassification is the state's heaviest enforcement focus.
| Factor | Points toward employee | Points toward contractor |
|---|---|---|
| Control over how the work is done | You direct the methods and steps | They decide how to do it |
| Tools and equipment | You supply them | They bring their own |
| Set hours and location | You set them | They set their own |
| Other clients | They work only for you | They serve many clients |
| Business entity (construction) | They work as an individual | They operate as a registered business |
What it costs to get this wrong
Misclassification is where the money and the risk collide. If a 1099 worker who is really an employee gets hurt, the state's Special Compensation Fund may pay the claim and then bill you for everything it paid plus a 65 percent penalty, and you also face the per-week uninsured fines. A willful failure to insure is a gross misdemeanor. In construction the 14-factor test makes it easy to fall on the employee side, so treating field workers as contractors without meeting every factor is a real exposure.
If you hire subcontractors
Using genuine subcontractors is fine, but two Minnesota rules protect you only if you handle them right. First, a general contractor can be held liable for comp owed to an uninsured subcontractor's injured workers, so the safe move is to confirm every sub carries its own coverage and to collect a certificate proving it. Second, a solo subcontractor with no employees may not be required to carry comp on themselves, which is why many carry a low-payroll policy, sometimes called a ghost policy, just to produce the certificate you need. Asking for that proof up front keeps an uninsured sub from becoming your problem.
A Minnesota plumbing example
Illustrative, not a quote. A Minnesota plumbing company pays six installers on a 1099 and treats them as contractors, but it sets their schedules, supplies the trucks and materials, and requires them to work only for the company. Under the control test those installers look like employees, and because this is building work the strict 14-factor test also points to employee, so the company likely needs to cover them. We help the company sort genuine independents from workers who are really employees, get the employees covered, and collect certificates from the true independents. See our workers comp for plumbers page.
Real questions Minnesota owners ask
Do I need workers comp for 1099 contractors in Minnesota?
It depends on whether they are really employees. Minnesota uses a control test, and a strict 14-factor test in construction, not the tax form, so a 1099 worker you direct usually must be covered.
Does a 1099 or a signed contract make someone a contractor?
No. Minnesota looks at the real relationship, not the paperwork. If you control how, when, and where the work is done, the worker can be an employee for comp even with a 1099 and a contract.
I heard some states use an ABC test. Does Minnesota?
No. Minnesota uses a common-law right-of-control test for most work and a 14-factor statutory test in construction. It does not use the ABC test for workers comp.
What changed for construction on March 1, 2025?
Minnesota replaced the older nine-factor construction test with a stricter 14-factor test and now requires the worker to operate as a business entity. Failing any one factor makes them an employee.
What is the penalty for calling employees contractors?
If a misclassified worker is hurt, the state's Special Compensation Fund can pay the claim and bill you plus a 65 percent penalty, on top of fines up to 1,000 dollars per employee for each week uninsured. A willful failure is a gross misdemeanor.
Am I responsible for an uninsured subcontractor's injured worker?
You can be. As a general contractor you can be made to pay comp for an uninsured sub's injured workers, so confirm every sub carries coverage and collect a certificate before they start.
Do solo subcontractors need their own workers comp?
Not always on themselves, but many carry a low-payroll policy anyway so they can give you proof of coverage. Getting that certificate protects you from being stuck with their injury.
Why Minnesota owners choose Morrow
- We shop the right market for you. In Minnesota you buy workers' comp on the open, competitive market from any private insurer licensed in the state, because there is no state fund, and if no carrier will take you the assigned-risk plan (MWCARP) is the guaranteed backstop, so we can shop your rate freely and still have a fallback 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 Minnesota guides
Every Minnesota 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 Minnesota (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?
- Minnesota plumber workers comp
This guide is general information, not legal advice. Minnesota rules and penalty amounts can change, so verify current requirements with the Minnesota Department of Labor and Industry or a licensed advisor before you rely on them. Last updated: July 2026.