According to the Kentucky Workers' Compensation Act, you must provide coverage to your employees and to any uninsured subcontractor you hire.
Your auditor will determine if an individual meets the criteria to be considered an independent contractor. A common misperception is that if a person is paid by a 1099, with no taxes withheld, that he/she is considered an independent contractor. The 1099 has little influence on whether the person is considered an independent contractor.
Excluding Subcontract Labor
Subcontract labor can be excluded from your audit by providing a valid Certificate of Insurance for the subcontractor in question. If your subcontractors have their own workers' compensation insurance, simply provide the auditor with an original valid Certificate of Insurance for each subcontractor, and your auditor will not include payments made to those subcontractors on your audit. Please make sure that the Certificates of Insurance cover your entire policy period.