Independent Contractors and Misclassification in Washington: The EPLI Angle

Washington has no single independent contractor test. Workers comp (RCW 51.08.195) and unemployment (RCW 50.04.140) presume employment unless strict conditions are met; the Minimum Wage Act uses an economic dependence test (Anfinson v. FedEx, 2012); and independent contractors can still sue for discrimination in contracting (Marquis v. City of Spokane, 1996). Misclassified workers bring wage, workers comp, and employment claims, most of which EPLI does not cover.

By Trella Commercial · Updated October 5, 2026

The short version

Four agencies, four tests. A worker can be a contractor for one Washington law and an employee for another.
Workers comp and unemployment presume employment. The business must prove every condition of the exception.
Wage law asks who the worker economically depends on, not just who controls the work (Anfinson v. FedEx Ground, 2012).
Discrimination law reaches contractors. Independent contractors can sue for discrimination in making or performing a contract for personal services (Marquis v. City of Spokane, 1996).
Penalties stack up: unpaid workers comp premiums with penalties, wage claims with double damages, and potential felony liability for knowingly underreporting payroll to evade premiums.
EPLI usually covers contractors only by endorsement and excludes the wage and premium consequences of misclassification.

Washington's tests side by side

Law	Test	Key point
Workers comp (L&I), RCW 51.08.195	Six conditions must all be met, including freedom from control, an independently established business, an IRS schedule of expenses, a UBI number, and separate books	Presumes the worker is covered
Unemployment (ESD), RCW 50.04.140	Either a three-part test (free from control, outside the usual course or places of business, independently established business) or a six-part test like L&I's	Employment is deemed to exist until the business proves otherwise
Minimum Wage Act	Economic dependence (economic reality), adopted from federal FLSA case law (Anfinson v. FedEx Ground, 2012)	The right-to-control test was rejected for wage claims
Law Against Discrimination	Independent contractors may sue for discrimination in making or performing a contract for personal services (Marquis v. City of Spokane, 1996)	Applies even if the worker truly is a contractor
Construction	Separate tests for registered contractors and electricians (RCW 50.04.145, 51.08.181); using an unregistered contractor is an infraction (RCW 18.27.200)	Check registration of every sub
Federal tax (IRS)	Common-law control test: behavioral, financial, and type of relationship	Separate from all of the above

Penalties for getting it wrong

Consequence	Source
Unpaid workers comp premiums, plus up to ten times the difference in premiums for knowingly misrepresenting payroll or hours	RCW 51.48.020
Class C felony for knowingly failing to report payroll to evade premiums	RCW 51.48.020
For failing to secure coverage: the greater of $1,000 or double the premiums, plus 50% to 100% of claim costs if an uninsured worker is injured	RCW 51.48.010
Unpaid overtime, minimum wage, and paid sick leave for a worker who was really an employee, with double damages if wages were willfully withheld	RCW 49.46, 49.52.070
Unemployment taxes and benefits charged to the business	RCW 50.04.140

Idaho's tests

Law	Test
Workers comp	Right to control the means of the work (Idaho Code 72-102)
Unemployment	The worker must be free from control or direction and engaged in an independently established trade or business (Idaho Code 72-1316)
Idaho Human Rights Act	Covers employees of employers with five or more employees

Idaho's tests are narrower than Washington's, so a worker who qualifies as a contractor in Idaho may not in Washington.

How EPLI responds

Situation	EPLI
A misclassified worker brings a discrimination or harassment claim as an employee	Covered if the policy covers the claimant; many policies cover employees broadly, and some exclude independent contractors unless endorsed
A true independent contractor alleges discrimination in contracting	Covered only if the policy includes independent contractors
Back wages, overtime, sick leave for a misclassified worker	Usually excluded as wage and hour
Workers comp premiums and penalties	Not insurable under EPLI
Retaliation after a worker challenges their classification	Usually covered as retaliation

Ask your broker to add independent contractors to the EPLI definition of insured persons and claimants if you use them regularly. See what EPLI covers and the wage and hour gap.

A classification checklist

Apply the strictest test that applies: in Washington, usually L&I's six conditions.
Confirm each contractor's UBI number, registration (for construction), and own business.
Avoid controlling how the work is done: schedules, checklists, and training point to employment.
Keep contracts that match reality, but remember agencies look at how the work actually happens.
Collect certificates of insurance from contractors who say they have their own workers comp and liability coverage.
Review high-risk groups: cleaners, delivery drivers, installers, and anyone working only for you.

For cleaning businesses specifically, see cleaning and janitorial insurance.

Common questions

How does Washington decide if a worker is an independent contractor?

It depends on the law. Workers comp uses six conditions in RCW 51.08.195, unemployment uses RCW 50.04.140, wage law uses an economic dependence test, and discrimination law protects contractors in contracting. A business must satisfy each test separately.

What happens if I misclassify an employee in Washington?

You can owe back workers comp premiums with penalties (up to ten times the difference for knowing misrepresentation), unemployment taxes, unpaid wages and sick leave with possible double damages, and claim costs if an uninsured worker is injured. Knowingly underreporting payroll to evade premiums can be a felony.

Can an independent contractor sue for discrimination in Washington?

Yes. In Marquis v. City of Spokane (1996), the Washington Supreme Court held that an independent contractor may bring an action for discrimination in the making or performance of a contract for personal services.

Does EPLI cover independent contractors?

Only if the policy includes them. Many EPLI policies cover employees broadly but require an endorsement for independent contractors as claimants or insureds. Wage and premium consequences of misclassification are generally excluded.

Is Idaho's independent contractor test the same as Washington's?

No. Idaho focuses on the right to control and an independently established business, which is generally easier to satisfy than Washington's multi-part tests. Businesses operating in both states need to meet the stricter Washington tests for Washington work.

Sources

This page is general information, not legal advice. Laws were checked against primary sources in October 2026.

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