MI Workers Comp: Do You Need Coverage for Independent Contractors?

When it comes to workers compensation insurance in Michigan, many business owners wonder: Do I need to provide coverage for independent contractors? The short answer is no—but with important caveats. Let’s break it down so you can stay compliant and protect your business.

What Is an Independent Contractor?

An independent contractor is someone who performs work for your business but is not classified as an employee. They often have more control over how and when they do their work and are responsible for paying their own taxes.

But when it comes to workers’ compensation, independent contractors are treated very differently than employees.

Are Independent Contractors Covered Under Workers Compensation in Michigan?

Generally, no. In Michigan, independent contractors—especially sole proprietors—are not eligible to receive workers compensation benefits under your policy.

According to the State of Michigan’s Department of Labor and Economic Opportunity (LEO):

“A sole proprietor cannot receive workers’ compensation benefits under a policy issued to the sole proprietorship or the general contractor (principal contractor) when the sole proprietorship operates as an independent contractor.”

However, there are exceptions based on how the contractor’s business is structured:

Partnerships, corporations, or LLCs can have their own workers’ compensation insurance. Individuals operating under one of these structures can choose to cover themselves under their own policy.
If they are truly independent and have their own coverage, you’re typically not responsible for covering them under your policy.

Why This Matters: Risk of Misclassification

It’s critical to accurately classify your workers. If someone should be considered an employee and is misclassified as an independent contractor, you could face:

Fines and penalties
Back pay on premiums from audits
Potential liability for medical bills and lost wages in the event of an injury

Always review the nature of the relationship and consult a legal or insurance expert if you’re unsure.

Should You Require Proof of Workers Comp Insurance?

Yes. If you hire independent contractors or subcontractors, it’s a best practice to require proof of their workers compensation insurance.

Doing so:

Helps protect you from being held financially responsible for their injuries
Shows due diligence if an audit or lawsuit arises
Keeps your business in compliance with Michigan laws and reduces risk

What If Your Subcontractor Doesn’t Have Insurance?

If a subcontractor or independent contractor working on your job site doesn’t have their own workers comp insurance, you could be held liable for their injuries. In some cases, they may be treated as a de facto employee under Michigan law.

This is why documentation is key. Always request a certificate of insurance (COI) before allowing them to begin work.

Final Thoughts: Protect Your Business

In Michigan, you are not legally required to carry workers’ compensation for true independent contractors—especially sole proprietors—but you do need to:

Verify their business structure
Ensure they have their own coverage
Avoid misclassifying employees
Keep records of insurance documentation

Want help reviewing your workers’ comp policy or making sure you’re compliant?
📞 Contact us today—we’ll walk you through everything and make sure you’re protected.

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