Do I Need Workers' Comp
With One Employee in Montana?
Short answer: yes. In Montana, even one employee generally means you must carry workers' comp — with a few owner exceptions and one costly 1099 trap. Here's the plain-English version.
Short answer: in Montana, yes — if you have even one employee, you're generally required to carry workers' compensation insurance.Montana doesn't use the "construction at one, everyone else at a higher headcount" split some states have. Once you have employees, coverage is the rule, with a few specific exceptions below. Get it wrong and a single uninsured injury can be the kind of bill that ends a business.
By Jason Anderson — Co-Founder, 406 Consulting Group. Big-firm-trained accountant who keeps Montana employers' payroll, classifications, and compliance clean so the surprises don't land at the worst time.
Quick Answer
- →One or more employees in Montana generally means you must carry workers' comp.
- →Owners can often opt out of covering themselves — sole proprietors, working LLC members, and corporate officers — but employees still must be covered.
- →A "1099 contractor" only counts as independent if they hold a valid Independent Contractor Exemption Certificate (ICEC) — otherwise the state may treat them as your employee.
- →No coverage when it's required = penalties, personal liability, and an uninsured claim you pay out of pocket.
Who has to carry it — and who can opt out
Montana requires most employers to provide workers' comp coverage as soon as they have employees. The common point of confusion is the owner. Montana lets certain owners elect out of covering themselves— a sole proprietor, a working member of a partnership or LLC, or a corporate officer — but that election only covers the owner. The moment you put a W-2 employee on the books, that person generally has to be covered.
Must be covered
W-2 employees — full-time, part-time, or seasonal. Even one triggers the requirement.
Can usually opt out (self only)
Sole proprietors, working LLC members/partners, and corporate officers — by electing exemption for themselves.
Confirm your situation with the Montana Department of Labor & Industry— the rules around officers, family members, and small operations have specific tests.
The 1099 trap
This is where Montana contractors get burned. Calling someone a "1099 subcontractor" does not, by itself, make them independent. In Montana, a worker is only truly independent if they carry their own coverage or hold a valid Independent Contractor Exemption Certificate (ICEC). Hire an uninsured sub without one, they get hurt on your job, and the claim — and the premium — can roll right up to you as if they were your employee.
Collect a copy of every sub's ICEC or their own workers' comp certificate before they set foot on the job. No certificate, no exemption — and the exposure is yours.
But here's the protective move most owners miss — and it's one we've watched save people in an audit. If a sub doesn't have an ICEC or their own policy, you can simply add them to your own workers' comp coverage. Then they're genuinely covered if they get hurt, and you've defused the audit, because the auditor would otherwise assess premium on those payments anyway. You end up paying either way — covering them on purpose means you actually get the protection you're paying for, instead of a surprise bill with no coverage behind it.
The audit-proof habit: get an ICEC or a certificate of coverage from every sub — and for anyone who doesn't have one, put them on your policy rather than hope it never comes up. Confirm the details with your carrier.
Why the bookkeeping matters
Picture Joe's Plumbing in Kalispell hiring his first helper. Joe buys a policy, but the helper gets coded under a cheap office class code instead of the correct trade code. For a while premiums look great — until the annual audit reclassifies the work, and Joe owes back premium plus penalties on every payroll since. (Illustrative scenario.) Workers' comp premiums are driven by payroll class codes, so the way your books and payroll are set up is the difference between a clean audit and a surprise bill. We keep class codes, officer exemptions, and sub-certificate tracking correct from day one.
FAQ
Do sole proprietors with no employees need workers' comp in Montana?
Generally no — a sole proprietor with no employees isn't required to cover themselves and can elect exemption. The requirement kicks in when you hire employees, who must be covered. Many owners still choose to carry coverage on themselves, because health insurance often won't pay for a work-related injury. Confirm your specifics with the Montana Department of Labor & Industry.
Are my 1099 subcontractors covered under my policy?
Not automatically, and that's the risk. In Montana a subcontractor is only treated as independent if they hold a valid Independent Contractor Exemption Certificate (ICEC) or carry their own workers' comp. If they don't, the state can treat them as your employee — meaning an injury becomes your claim and their pay can be added to your premium at audit. The protective move: collect the certificate before work starts — and for any sub who doesn't have one, add them to your own workers' comp policy. That way they're actually covered if they're hurt, and you've headed off the audit assessment, since you'd be charged premium on those payments anyway.
What happens if I don't carry it when I'm required to?
Operating uninsured when coverage is required can bring penalties and fines, and it leaves you personally exposed: if a worker is hurt, you may pay the medical and wage costs directly, plus potential liability. For most small businesses, one serious uninsured injury costs far more than years of premiums. It's the definition of a risk not worth taking.
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Montana WC at a Glance
Montana Payroll, Done Right