Hiring a 1099 Contractor in Washington: What L&I Expects

Issuing a 1099 does not settle whether a worker is covered by your workers' compensation account. In Washington, the Department of Labor & Industries decides who counts as a covered worker using its own tests, and a worker can be an independent contractor for tax purposes and still be yours for L&I purposes. The safe sequence is to check the tests before the work starts, not after an injury or an audit.

Key points

• The IRS and L&I ask different questions. A 1099 answers the tax one.
• Washington law sets out multi-part tests for independent contractor status, with a separate test for construction trades. All parts have to be met.
• A contractor who carries their own L&I account, or who is a registered contractor with their own coverage, is a different situation from a sole operator with neither.
• If L&I decides the worker should have been covered, premiums can be assessed back to the start of the work.
• Keep the contract, the contractor's registration and coverage records with your own account paperwork.

Why the tax form is not the test

The 1099 form tells the IRS that you paid someone who is not on your payroll. It says nothing about who controlled the work, whether the person was free to work for others, or whether they ran a business of their own. Those are the questions L&I asks when it decides whether a person doing work for you is a "worker" under the Industrial Insurance Act. [1]

That is why two businesses can issue identical 1099s and get different answers. A freelance designer who works from her own studio, bills several clients and sets her own hours looks different from a "contractor" who shows up to your shop every day, uses your tools and takes direction from your manager. The second arrangement tends to be treated as employment regardless of what the invoice says.

If you want the general background on how the two categories differ across states, our explainer on independent contractors vs employees covers it. This article stays with Washington.

The tests L&I uses

Washington's statute sets out a six-part test for most work, and a seven-part test for construction and similar registered trades. [1] [2] In plain terms, the tests look at whether the person:

• is free from your direction and control over how the work is done, in the contract and in practice;
• does the work away from your premises, or in a place of their own, or in the ordinary course of a business that is different from yours;
• runs an independently established business that would survive the end of your contract, or has a principal place of business that is eligible for a tax deduction;
• files with the IRS and the state as a business, with an account with the Department of Revenue and any other registration the work requires;
• keeps their own books and records for the business.

The construction test adds that the person must be a registered contractor (or licensed electrician) in their own right. [2]

The exact wording is in the statute, and L&I applies it case by case. Two things matter for an employer: every element has to be satisfied, not most of them, and the facts on the ground outweigh the contract's labels.

What to verify before the work starts

A short checklist, done once per contractor and kept on file:

1. Registration and license. For construction and electrical work, look the contractor up in L&I's Verify a Contractor tool and confirm the registration is active. [3]
2. Their own L&I account. Ask whether they report and pay premiums on their own workers. A contractor with employees should have an account; a sole operator may have elected optional coverage for themselves.
3. Certificate of coverage. L&I can issue a certificate showing an employer's workers' compensation account status. Ask for it, and keep it with the contract. Our guide to certificates of insurance explains what a certificate does and does not prove.
4. The contract. It should describe a result, not a schedule and a supervisor. If your manager will direct the work day to day, the contract will not save the classification.
5. Your own account. If the arrangement looks like employment under the tests, report the hours on your account from the first day rather than waiting to be told.

None of this is legal advice, and borderline cases deserve a call to L&I or an employment lawyer before the work starts.

What happens if L&I reclassifies the worker

When L&I audits an employer and concludes that a 1099 contractor was in fact a covered worker, it can assess the premiums that should have been paid for that person's hours, with interest and, in some circumstances, penalties. [4] An assessment can cover past periods, within the limits the statute sets, not only the time after the audit.

The reverse risk is quieter. If an uncovered worker is hurt on your job, the claim is still filed, and L&I will look at who should have been covering them. The employer who assumed the 1099 settled the question is usually the one who finds out it did not.

How this interacts with your general liability policy

Workers' compensation and general liability answer different questions. L&I covers the worker's injury. Your general liability insurance in Washington responds to claims by third parties, and it may be rated on payroll or subcontractor costs, which is why your liability insurer also asks about 1099 workers at audit.

Two practical consequences. First, uninsured subcontractors can increase your own general liability premium, because the insurer treats their work as yours. Second, a subcontractor's injury claim that falls outside workers' compensation can become a liability claim against you. Collecting the contractor's own certificates of insurance addresses both, and our workers' compensation requirements guide covers the audit side in more detail.

Sources

[1] RCW 51.08.195, Worker: independent contractor exception. Accessed October 26, 2026.

[2] RCW 51.08.181, Worker: registered contractor and electrician exclusions. Accessed October 26, 2026.

[3] Washington State Department of Labor & Industries, Verify a Contractor (agency site). Accessed October 26, 2026.

[4] Washington State Department of Labor & Industries, employer audits and independent contractors (agency site). Accessed October 26, 2026.

Coverage examples are illustrative. Policy wording, exclusions, limits, underwriting and applicable law determine coverage. This article is general information, not legal advice or a coverage determination.