Failed The Independent Contractor Test? These Exemptions May Apply.

State independent contractor tests indicate when a worker is exempt from paying employment taxes—i.e. L&I’s workers compensation taxes and ESD’s unemployment insurance premiums—on grounds that he or she is an independent contractor, and not an employee.

If a business fails the independent contractor test, however, is it completely out of luck? Must it be liable for employment taxes. Not necessarily. This is because under Washington law, when a worker/contractor does not qualify as an exempt independent contractor, a business may nonetheless be exempt from paying employment taxes if the service performed by the worker is otherwise statutorily exempt from the definition of employment. Below is a list of services and professions that Washington law specifically excludes from the definition of employment. If a worker/contractor provides any of these services, the worker is not considered to be an employee, and a business will therefore not be liable for employment taxes. The exemptions vary by agency, though there is some overlap.

1. L&I Employment Exemptions

The Workers Compensation Act (also known as the Industrial Insurance Act) exempts certain workers from employment taxes based on the services they perform as contractors, or based on whether the worker’s profession is specifically exempt from the definition of employment. Below is a list of exempt contractors and professions.

Exempt Contractors: The following contractors are exempt without regard to the independent contractor test because they are not considered to be in employment:

  • Contractors who are themselves employers and bring their own workers (employees or subs) to the job.
  • Contractors who are hired to supply heavy equipment/machinery or costly specialized equipment.

For more information, see L&I’s Independent contractor Guide, at pgs. 3-4.

Exempt Professions: The following professions are explicitly excluded from the Worker’s Compensation Act’s definition of employment:

  • Domestic servant
  • Casual laborer
  • Person hired to run personal errands/chores
  • Person working for religious/charitable aid or sustenance
  • Child (under 18) working on family farm.
  • Horse-racing jockey
  • Musician or entertainer
  • Newspaper carrier
  • Insurance agent broker or solicitor
  • Booth renter i.e. cosmetologist, beautician, or barber.
  • Student volunteer (K-12th grade)
  • Corporate officer

Note that these profession have specific legal definitions, so confirm with an attorney that they apply to your workers/contractors before assuming that they apply.

2. ESD Employment Exemptions

The services and/or professions below are explicitly excluded from the Employment Security Act’s definition of employment:

  • Workers providing services through Service Referral Agencies
  • Musicians or entertainers
  • Agricultural labor
  • Domestic service
  • Corporate officers
  • Maritime service
  • Family employment
  • Nonresident aliens
  • Foreign governmental service
  • Massage practitioners
  • Barber and cosmetology services
  • Insurance agents, brokers, or solicitors, real estate brokers or real estate salespersons, and investment company agents or solicitors
  • Travel services
  • Outside salesperson paid by commission
  • Agricultural labor by farm interns
  • Newspaper delivery persons
  • Appraisal practitioner services
  • Casual labor
  • Small performing arts
  • Services performed by a minister
  • Work relief or work training
  • Inmates
  • Hospital patients
  • Work study
  • Work experience
  • Preschool employees
  • Elected officials
  • Members of the National Guard

Again, note that these profession have specific legal definitions under the Employment Security Act, so confirm with an attorney that they apply to your workers/contractors before assuming that they apply. Note also that your worker/contractor may be exempt for the purposes of ESD and not for L&I and other purposes (e.g. state minimum wage obligations).

For more information on how to comply with independent contractor obligations, consult with an experienced independent contractor law attorney, and check out 1099 Review™, Washington’s State’s first online independent contractor risk assessment tool and resource center.

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