The face of the job market has been changing. More workers are choosing to be freelancers. According to one study, nearly one-third of the American workforce work for themselves, rather than an employer. As the number of self-employed workers has increased, the rules have begun to change. Here's what you need to know about freelancing and worker's compensation.

What Is Worker's Compensation?

In some lines of work, injuries on the job are a real possibility. Worker's compensation is a type of insurance that covers lost wages and medical expenses should you become injured on the job. Employers are required by most state laws to provide this to their employees at no cost. In exchange, the employee gives up the right to sue for damages as a result of their injury.

When the Freelancer Is Responsible

In general, contracted workers and freelancers are not required by law to have worker's compensation insurance. However, some clients may require the insurance, especially if the freelancer works in a job where injuries are common, such as construction. Even if the client does not require the freelancer to carry their own worker's compensation, the freelancer would be responsible if the contract explicitly states that they are responsible for any injuries that occur on the job.

When the Client Is Responsible

Typically, clients are not required to provide freelancers or contractors with worker's compensation. However, there are exceptions. If the freelancer meets a set of criteria set by the IRS, in most states, the client does have to provide the insurance. The criteria relates to how much control the client has over the freelancer's work. If the freelancer has limited control over how they do their job, a lack of flexibility in finding other clients, or performs a key aspect of the business, then they will typically be considered an employee. Being considered an employee would require the employer to have worker's compensation insurance.

Additionally, if the contract between the freelancer and client does not explicitly state responsibility either way, then the client often ends up being the responsible party if an injury does occur on the job. This tends to be more true when the client is in control of the work environment.  

Worker's compensation is a complicated aspect of the freelancer-client relationship. Regardless of your role, you should ensure that your contract clearly states who is responsible if an injury should occur. Make sure you know whether or not worker's compensation is included in your contract. A little planning can save a lot of hassle in the long run.