In New Jersey, paying a worker on a 1099 does not automatically let you skip workers compensation for them. The state decides who is really an employee using a control and relative-nature-of-the-work test, so a worker you direct day to day usually must be covered no matter what the paperwork says.
Who this is for: New Jersey owners who pay workers as 1099 independent contractors and want to know whether they still need workers comp for them. Workers comp pays medical bills and part of lost wages after a work injury.
The short version
- The label does not decide it: a 1099 form does not make someone an independent contractor under New Jersey workers comp law.
- Control is the test: if you direct how and when the work is done and it is central to your business, the worker is likely an employee.
- A different rule than your taxes use: what decides it is who controls the work, not the checklist New Jersey uses for unemployment claims (called the ABC test).
- Construction is stricter: general contractors can be liable for an uninsured subcontractor's injured worker.
- Misclassifying is penalized on its own: labeling employees as contractors carries its own penalties in New Jersey.
How New Jersey decides employee versus contractor
For workers comp, New Jersey courts ask two things: how much right you have to control the work, and whether the work is an integral part of your regular business and the worker depends on you economically. A yes to either points toward employee status. New Jersey reads its comp law broadly to cover as many workers as possible, so close calls tend to land on the employee side.
Important: this is not the ABC test. New Jersey uses the ABC test for unemployment and wage-and-hour law, and adopted new classification rules in 2026 for those laws, but workers comp still runs on the older control and relative-nature-of-the-work test. Do not assume a worker who is a contractor for tax purposes is also a contractor for workers comp.
| Sign of the relationship | Points to employee | Points to contractor |
|---|---|---|
| Who controls how and when the work is done | You do | The worker does |
| Is the work part of your core business | Yes, integral | No, a one-off or specialty |
| Does the worker depend on you for income | Mostly yes | Serves many clients |
| Tools and equipment | You provide them | The worker provides them |
| Set schedule and supervision | You set it | The worker sets it |
Construction and general-contractor liability
Construction gets special attention in New Jersey. If a subcontractor fails to carry required workers comp, the general contractor who placed the work becomes liable for benefits owed to the sub's injured worker, and then has to chase the sub for reimbursement. That is why general contractors insist on seeing a certificate of coverage from every sub before work starts.
The cost of getting it wrong
Misrepresenting employees as independent contractors is penalized separately in New Jersey. On top of the standard penalties for going uninsured, a knowing misclassification can bring a stop-work order and, because it is treated as providing false information, criminal exposure. Getting the classification right up front is far cheaper.
A quick New Jersey example
Illustrative, not a quote. A drywall company in Vineland pays its hangers on 1099s and treats them as contractors. In practice the company sets their hours, supplies the materials, and the crews work only for that company. After one hanger falls and is hurt, the state looks at the control test and treats the crew as employees. Because the company carried no workers comp, it faces penalties of up to $5,000 for the first 10 days uninsured and up to $5,000 for each 10 days after, plus the injured worker's benefits, all of which a policy would have covered.
Real questions New Jersey owners ask
My workers get 1099s, so I do not need workers comp, right?
Not necessarily. In New Jersey the 1099 label does not decide it. If you control how and when the work is done and it is part of your regular business, the worker is likely an employee who must be covered.
I heard the rules for who counts as an employee got stricter. Does that change my workers comp?
Not for workers comp. New Jersey uses a stricter checklist (called the ABC test) for unemployment and wage claims, but workers comp still looks at who actually controls the day-to-day work. If you direct how and when the work gets done, that worker is likely an employee you must cover.
I run a general contracting business. What about my subcontractors?
If a subcontractor fails to carry required workers comp, you as the general contractor can be liable for that sub's injured worker. Always collect a certificate of coverage from each sub before work begins.
What is the penalty for calling employees contractors?
New Jersey penalizes misclassification separately. A knowing misrepresentation of employees as contractors can bring a stop-work order and criminal exposure, on top of the standard penalties for being uninsured.
A worker only helps me occasionally. Are they an employee?
They might still be. Only genuinely casual work, meaning jobs that come up by chance and are not regular or recurring, falls outside coverage. Regular help usually counts even if part-time.
How do I protect myself if I use real contractors?
Keep proof that each contractor is truly independent and carries their own workers comp, and get a certificate from them. If they cannot show coverage, their payroll can end up on your policy at audit.
Can I just cover the 1099 workers to be safe?
Often yes, and many owners do. Including questionable workers on your policy avoids a surprise at audit and makes sure they are protected if hurt. We can help you decide who to include.
Why New Jersey owners choose Morrow
- We shop the right market for you. New Jersey is an open, competitive market with no state fund, so coverage comes from any of the private insurers the state authorizes, and Morrow shops several of them to fit your trade and budget instead of leaving you with one option.
- 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 New Jersey guides
Every New Jersey 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 New Jersey (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?
- Contractor workers comp in New Jersey
This guide is general information, not legal advice. New Jersey rules and penalty amounts can change, so verify current requirements with the New Jersey Division of Workers' Compensation or a licensed advisor before you rely on them. Last updated: July 2026.