What Is an Independent Contractor Agreement?
An independent contractor agreement is a binding contract between an employer and a hired third-party. This form outlines the timeline, payment details, and conditions of the arrangement. Many businesses use independent contractor agreements when working with consultants, freelancers, or agencies.
Legal Templates’s free independent contractor agreement provides guidelines for employers and contractors. Use our forms to create a customized agreement that works for you.
Independent Contractor Agreements- By Type
An independent contractor agreement applies to consultants, freelancers, trade professionals, and service providers. The terms of the contract vary depending on the services or personnel involved. Consider the following types of independent contractor agreements to create a form that meets your needs.
Independent Contractor Agreements- By State
State laws often include various legal requirements, industry-specific exemptions, or non-compete regulations. View state-specific independent contractor agreement templates below for more specific terms.
- Alabama
- Alaska
- Arizona
- Arkansas
- California
- Colorado
- Connecticut
- Delaware
- District of Columbia
- Florida
- Georgia
- Hawaii
- Idaho
- Illinois
- Indiana
- Iowa
- Kansas
- Kentucky
- Louisiana
- Maine
- Maryland
- Massachusetts
- Michigan
- Minnesota
- Mississippi
- Missouri
- Montana
- Nebraska
- Nevada
- New Hampshire
- New Jersey
- New Mexico
- New York
- North Carolina
- North Dakota
- Ohio
- Oklahoma
- Oregon
- Pennsylvania
- Rhode Island
- South Carolina
- South Dakota
- Tennessee
- Texas
- Utah
- Vermont
- Virginia
- Washington
- West Virginia
- Wisconsin
- Wyoming
Worker Classification for Independent Contractors
Independent contractors differ from internal employees or other workers. Correctly classifying workers ensures protection for all parties and helps in tax and legal situations. Some states include specific tests or guidelines for determining a worker’s classification.
Independent Contractor vs. Employee
Independent contractors and employees often have different conditions, benefits, resources, and terms. While they both provide services for an employer, they also include unique circumstances. View the table below for an overview of the differences between an independent contractor and an employee.
| Independent Contractors | Employees |
|---|---|
| Set their own schedules | Work on an employer’s set schedule |
| Use their own tools and equipment | Employer provides tools and training |
| Work on a project basis | Typically hired for ongoing work |
| Pay their own taxes | Employer withholds and pays taxes |
| No benefits (health, PTO, etc.) | Receive benefits from the employer |
State Classification Methods
When determining whether to classify someone as an employee or contractor, the majority of states use the ABC test. An individual must meet all of the following requirements to be considered an independent contractor:
- A: The worker is free from the employer’s control while performing the job.
- B: The work is performed outside the company’s usual course of business.
- C: The worker is engaged in an independent trade, occupation, or business.
Some states use only part of the ABC qualifications. Pennsylvania, Colorado, Wyoming, Idaho, Montana, and Wisconsin use only the A and C of the ABC test. Virginia and Oklahoma allow you to classify someone as a contract if they meet the terms of either A and B or A and C.
Any states that do not use the ABC test to determine a worker’s classification follow the IRS Common Law Rules. This method uses information about the following aspects of the individual’s work:
- Behavioral control: Does the employer control the worker’s methods?
- Financial control: Does the hiring company control aspects of the worker’s compensation?
- Relational control: Does the hiring company offer the worker benefits such as insurance or vacation pay? Is the work being done part of the hiring company’s primary business? Is the working relationship ongoing?
If the employer does not control these aspects, the worker would be considered an independent contractor.
The Department of Labor’s 2024 independent contractor regulations were paused in May of 2025 while new standards are being developed.
How to Write an Independent Contractor Agreement
An independent contractor agreement requires the employer and contractor to negotiate and record the terms of their arrangement. This form must include the proper structure, content, and verifications to protect each party involved. Use the steps below to create an effective agreement for independent contractors.
1. Gather Contractor and Client Information
Collect and record contact and personal information for each party involved in the contract. Clearly identify the employer and the contractor, and note whether each party is an individual or an organization. Include the full legal name, address, and contact number for everyone involved. If either party is an entity, record the representative’s name and information.
2. Describe the Services
Provide a complete description of the contractor’s services and the work they will perform. List any deliverables, goals, or services involved in the contract. Also, include the start and end dates for the services or specify whether services will begin at the time of signing. The description of the services can be described either in the terms of this document or in a separate exhibit document.
3. Define Compensation Methods
Record how the employer plans to pay the independent contractor for the completion of their services. Payments are typically made as a lump sum or at a fixed rate. In some cases, payment may be contingent upon the completion of defined milestones or deliverables. Also, note whether the contractor will receive reimbursements for eligible business expenses. Note that the independent contractor is responsible for making all income tax payments.
4. Record Termination Timeline
The independent contractor agreement should also include guidelines for its termination. Select whether the business relationship will end at-will, on a specific date, after a defined achievement, or after a set period of time.
5. Add Extra Provisions
Note any additional provisions and supporting documentation. You can include an independent contractor confidentiality agreement or a non-compete clause in your contract. These terms and provisions allow you to specify who will own the work produced. It may also state whether the contractor is required to have their own insurance in the event of injuries or damages. You can also dictate who will be responsible for losses or legal damages.
6. Set Communication Regulations
Include your plan for communicating with the contractor via personal delivery, certified mail, courier services, or email. If documents will be delivered, include the contractor’s and client’s addresses. Also, record your preferred method for solving disputes. Include methods such as arbitration, mediation, litigation, or a combination.
7. Decide Governing Laws
Set the governing laws for your independent contractor agreement by selecting which state laws will apply. Typically, this is the state in which the employer handles its primary operations. These state laws will inform the terms of your agreement and the handling of any disputes that may arise.
Sample Independent Contractor Agreement
Legal Templates’s free independent contractor agreement includes customizable terms and legally-compliant information. Use our downloadable form, available in both PDF and Word formats.
