Last updated: August 2026. Requirements verified August 2026 — state rules change often; verify with your state agency before signing anything. Next review: February 2027.
Key point: Whether your state requires workers' comp for a subcontractor with no employees depends entirely on the state, because workers' compensation is state-administered, not federal. In most states, a genuine sole proprietor with zero employees is not legally required to carry workers' comp on themselves, but the general contractor (GC) you're subbing for will almost always require it by contract anyway. The answer to "does my state require it" is rarely the answer to "can I sign this subcontract" — the subcontract usually requires more than the state does.
TL;DR
- Workers' comp is 100% state-administered. There is no single nationwide rule, and roughly 50 different statutes govern it. The federal government runs only narrow programs like longshore and federal-employee comp.
- Most states exempt a true sole proprietor with no employees from mandatory coverage, but 100% of commercial GCs can still demand it in the subcontract regardless of state law.
- The document that decides whether you can sign is the insurance requirements exhibit, not your state statute.
- When a GC requires comp from a solo sub, the usual fix is a real policy or a clean workers' comp waiver, not a "ghost policy" that fails an audit.
What "state-administered workers' comp" actually means
Workers' compensation is regulated at the state level, so the rule for a subcontractor with no employees is set by 50 separate state systems plus D.C., not by one federal law. The federal role is limited: the U.S. Department of Labor administers only specific programs for longshore workers, coal miners, and federal employees. Everything you care about as a trade sub — thresholds, exemptions, sole-proprietor rules — is set by your state.
Definition: Sole proprietor subcontractor workers' comp (state) is the coverage requirement (or exemption) a given state applies to a self-employed contractor who has no W-2 employees. Because it is state-administered, the same solo electrician can be exempt in one state and covered-by-default in the next. The clause mechanics on the subcontract, by contrast, are national and identical everywhere.
This distinction matters more than any single threshold number. If you want the deeper framing, see our breakdown of which small business rules are federal versus state in the US.
Does my state require workers' comp if I have no employees?
Usually no under state law, but usually yes under your contract. That is the honest two-part answer, and the two parts pull in opposite directions.
State law side. Most states treat a bona fide sole proprietor or single-member LLC with no employees as exempt from mandatory workers' comp on their own person. Some states let you opt in voluntarily if you want coverage for yourself, and a handful — including a few that route small-employer coverage through a state fund — treat certain construction-trade sole proprietors as covered by default unless they file an affirmative exemption. The classification also depends on how the state characterizes your relationship: the IRS guidance on independent contractor versus employee status drives federal tax treatment, but each state applies its own test for comp purposes, and those tests are frequently broader than the federal one. That is why "I'm a 1099" is not, by itself, a reliable answer to "am I exempt." You confirm your status through your state workers' compensation board, and rating data underlying most states' premiums comes from NCCI or an independent state rating bureau.
Contract side. Independent of what the statute says, the GC's subcontract almost always requires you to carry workers' comp, name the GC as an additional insured where applicable, and provide a certificate of insurance before you set foot on site. GCs do this because their own carrier audits them on uninsured subcontractors and charges premium for any sub who can't show coverage. That premium exposure is the GC's, so the GC pushes the requirement down to you contractually — regardless of whether your state would otherwise exempt you.
Can I waive workers' comp?
Sometimes, and this is where a clean paper trail replaces a policy you may not legally need. Many states issue a formal sole-proprietor exemption or exclusion certificate — a signed, filed document confirming you have elected out of coverage for yourself. When a GC's insurance exhibit collides with a genuine no-employee exemption, the standard resolution is one of two things:
- A real policy. You buy an actual workers' comp policy (or a ghost-free minimum-payroll policy priced on your owner payroll). It satisfies the contract and survives the GC's year-end audit.
- A clean state exemption certificate. You provide the GC with your filed state exemption plus the general liability coverage the contract separately requires. Whether the GC accepts this is a business decision on their side; some accept exemptions, many do not for on-site trade work.
What you should avoid is a so-called "ghost policy" that shows zero payroll and no real coverage, sold purely to generate a certificate. These frequently fail the GC's carrier audit or the state's audit, leaving you exposed to back-premium and a voided COI mid-project.
What happens if I don't comply?
Two different failure modes, one per side of the answer above.
If you violate state law — for example, you have employees you treated as subs, or you operate in a default-coverage state without filing an exemption — penalties can include stop-work orders, fines assessed per employee per day, and personal liability for an injured worker's medical costs and lost wages. State enforcement of construction-trade coverage has tightened in recent years.
If you violate the contract — you sign a subcontract requiring comp and then can't produce a valid COI — the GC can withhold payment, remove you from the site, back-charge you for the coverage they had to buy, or terminate for default. None of that requires the state to have required coverage; the contract is its own enforcement mechanism.
The practical takeaway: verify your state rule at your state agency first, then read the insurance exhibit before you sign, and resolve any gap with a real policy or a filed exemption — never a ghost policy.
Frequently asked questions
Does the federal government require workers' comp for subcontractors? No. Workers' compensation is state-administered. The U.S. Department of Labor runs only narrow federal programs (longshore, coal miners, federal employees), none of which cover a typical trade subcontractor.
Am I exempt just because I'm a 1099 contractor? Not necessarily. Federal tax status and state workers' comp status are decided by different tests. Confirm your exemption with your state workers' compensation board, not your tax classification.
Can a GC require workers' comp even if my state exempts me? Yes. The subcontract is a private contract and can require more than state law. In practice most commercial GCs do require it or an accepted state exemption certificate.
Is a "ghost policy" a safe way to satisfy a GC? Generally no. Zero-payroll policies sold only to produce a certificate often fail carrier or state audits, exposing you to back-premium and a voided certificate mid-project.