If your Vermont 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. Vermont decides comp status with a two-part common-law test, the right of control and the nature of your business, not the simpler ABC test some states use. 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: Vermont 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; Vermont looks at the real working relationship.
- Vermont applies a two-part test: the right of control, and whether the work is part of your business.
- If you've googled the 'ABC test,' that is Vermont's rule for unemployment, not workers comp, so do not rely on it here.
- A written contract that says the worker is not an employee helps, but it does not override the facts.
- If a sub you hire has no coverage and one of their crew gets hurt, Vermont law can treat you as that worker's employer, so the injury becomes your problem.
How Vermont decides who is really independent
Vermont does not settle this on a single question or a loose checklist. Its courts use two tests together, drawn from the Edson v. State decision. First, the right of control: does the hiring business have the right to direct not just the result but how and by what methods the work gets done. Second, the nature of the business: is the work a regular part of your trade, the kind of thing your own employees would normally do. There is also a statutory add-on, in 21 V.S.A. 601, that lets a written agreement state the worker performs work distinct and separate from yours and is not an employee. Miss the control test or the nature-of-business test, and the worker is your employee for comp no matter what the paperwork says.
| Test Vermont applies | What it asks in plain terms |
|---|---|
| Right of control | Do you control how and by what methods the work is done, not just the finished result |
| Nature of your business | Is the work a regular part of your trade, the kind your own employees would normally do |
| Written agreement (a statutory add-on) | A signed contract can state the worker is distinct and separate and not an employee, but the facts still control |
The written agreement helps, but facts win
Vermont lets a written agreement do some of the work. A contract that describes the services and states the person does work distinct and separate from yours and is not an employee is useful evidence that the person is a genuine contractor. But it is not a shield if the day-to-day facts say otherwise. If you supply the tools, set the schedule, and direct exactly how the work is done, and the work is a normal part of your business, a signed agreement will not turn an employee into a contractor. Use the agreement, but make sure the real working relationship matches it.
The construction trap
Construction has an extra rule that catches uninsured hirers, and it is where Vermont focuses its enforcement. Under 21 V.S.A. 601, the definition of employer reaches a business that is virtually the proprietor or operator of the work being done, even when a subcontractor is the direct employer. So if you hire a sub who does not carry coverage and one of their workers is hurt, you can be treated as that worker's statutory employer and be on the hook for the benefits. Confirming that every sub carries its own comp, and collecting a certificate before work starts, is not paperwork, it is what keeps their injuries from becoming your uninsured loss.
A Bennington example
Illustrative, not a quote. A Bennington 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, and framing is a regular part of his business, so the crew fails both parts of Vermont's test, and one sub carries no coverage. 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 insured, collects certificates, and asks us to set up a policy so his own exposure is covered. See our workers comp for general contractors page.
Real questions Vermont owners ask
Do I need workers comp for my 1099 contractors in Vermont?
It depends on whether they are truly independent. Vermont uses a control and nature-of-business test, so a worker who does a regular part of your business under your direction is an employee you must cover.
How does Vermont decide if my 1099 worker is really an employee?
It applies two tests together: whether you control how the work is done, and whether the work is a regular part of your business. Miss either one and the worker is treated as your employee for comp.
Does a signed 1099 or contract make someone a contractor?
Not on its own. A written agreement stating the person is distinct and separate and not an employee is useful evidence, but the facts control. If you direct the work like an employer, the person is an employee.
I read that some states use an 'ABC test' to decide this, does Vermont?
No. The ABC test is Vermont's unemployment rule, not its workers comp test. For comp, Vermont uses the older right-of-control and nature-of-business tests, so do not rely on the ABC test to classify a worker.
My worker uses their own tools and sets their own hours. Is that enough?
Not by itself. Vermont does not decide this on one factor. Even with their own tools, a worker who does a regular part of your business under your control is likely your employee for comp.
Can I be liable for my subcontractor's injured workers?
Yes. Under 21 V.S.A. 601, a general contractor can be the statutory employer of an uninsured subcontractor's workers. Collecting proof of coverage from every sub before work starts protects you.
How do I protect my business when I use 1099 crews?
Confirm each worker truly passes the two-part test, require subs to carry their own comp and show a certificate, and keep your own policy in place so a misclassified worker's injury does not fall on you uninsured.
Why Vermont owners choose Morrow
- We shop the right market for you. In Vermont you buy workers' comp on the open market from any private carrier licensed in the state, because there is no state fund, and if no carrier will take you the NCCI-run Vermont Workers' Compensation Insurance Plan (the assigned risk pool) is the guaranteed fallback, so we can shop your rate freely and still have 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 Vermont guides
Every Vermont 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 Vermont (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?
- Vermont general contractor workers comp
This guide is general information, not legal advice. Vermont rules and penalty amounts can change, so verify current requirements with Vermont Department of Labor, Workers' Compensation and Safety Division or a licensed advisor before you rely on them. Last updated: July 2026.