A Kentucky independent contractor agreement lays out the relationship between an employer and an independent contractor, someone who performs work for the business that is not in line with its direct functions.
Like most states, Kentucky has clear rules that govern the independent contractor agreement and penalties for employee misidentification.
- Worker Classification: Common Law Test
- Tax Structure: Flat Income Tax
- Definition: 803 KAR 1:006
- At-Will Employment: Yes
Independent Contractor Definition
Kentucky law defines an employee as someone who works directly for the business, performing its everyday business functions [1] . An independent contractor, on the other hand, performs tasks that the company does not carry out as part of its everyday responsibilities and requirements, and they have more control over where those basic tasks are carried out.
Employers must pay taxes and ensure workers’ compensation insurance and unemployment insurance cover their employees, while independent contractors must take care of their own tax payments. Misclassifying an employee in Kentucky can lead to tax penalties, interest, and back unemployment insurance premiums.
Worker Classification Test
Kentucky uses the common law control test [2] to identify the distinction between independent contractors and employees. According to this test, employers can tell employees what to do, when to do it, and how they can perform those job tasks. Employers may also have the right to determine where those job tasks are performed — remotely vs. in-person, and at what site.
On the other hand, a contractor is hired to perform a specific job but can determine how to complete those tasks, when those tasks are completed — within the contract terms — and where they do the work.
Rights and Responsibilities
Independent contractors in Kentucky have the right to:
- Determine when they will perform the work laid out in their independent contractor agreement.
- Decide how they will perform many types of work laid out in the agreement.
- Select the location where they perform jobs related to the contract.
These freedoms, however, mean that independent contractors do not have all the same rights as employees in Kentucky, including the right to file a workers’ compensation claim if they suffer injuries while on the job.
State Taxes
Kentucky has a flat tax rate of 5% that independent contractors are responsible for paying. In addition, Kentucky independent contractors pay federal self-employment taxes, which include Medicare and Social Security withholdings [3] .
Filing for Unemployment
Generally, independent contractors in Kentucky cannot file for unemployment assistance. However, they have the right to seek help from other public assistance programs, including SNAP, KTAP, and Child Care Assistance.
Sample
You can download a Kentucky independent contractor agreement template below in PDF or Word format:
