A Michigan independent contractor agreement is a legal document that outlines the scope and terms of the relationship between a contractor and their client. It covers the rights, obligations, and timeframe of the services provided and must be signed by both parties.

Worker Classification: Common Law Test
Tax Structure: Flat Income Tax
Definition: The IRS 20-Factor Test
At-Will Employment: Yes (with exceptions)

Table of Contents

Independent Contractor Definition
Worker Classification Test
Rights and Responsibilities
Sample

Independent Contractor Definition

Michigan follows the Internal Revenue Service (IRS) 20-factor test to determine worker status. Under this test, workers who perform full-time and do not have a business of their own are employees. Independent contractors usually choose their schedules and may have their own business.

The Michigan Employment Security Act also excludes certain workers from the definition of “employment,” including:

Agricultural laborers
Individuals performing domestic services in a private home
Individuals employed by their spouse, son, or daughter

Worker Classification Test

The 20 factors of the IRS test are organized into three general categories:

1. Behavioral control factors. These include whether the worker must follow instructions about where, when, and how to do the work and whether the worker can hire, pay, and supervise their assistants.
2. Financial control factors. These include who provided the materials and tools, whether the worker can make a profit or suffer a loss due to performing the services, and whether the alleged employer pays the worker by hour, week, or month.
3. Relationship factors. These include whether the worker performs services that are essential or integral to the alleged employer’s business operation and whether the worker can perform services for multiple unrelated business entities.

Rights and Responsibilities

Unlike employees, independent contractors do not have unique rights in Michigan.

State Taxes

Under Michigan law, employers deduct Social Security taxes from employees’ paychecks and send taxes and wage reports to the IRS and Social Security. However, independent contractors must fill out their own forms and pay taxes directly to the IRS and Social Security.

Michigan’s Income Tax Act of 1967 has the same definition of employee as § 3401(c) of the Internal Revenue Code: an officer, employee, or elected official of any agency or federal or state government, or an officer of a corporation [1] .

Filing for Unemployment

Independent contractors cannot file for unemployment in Michigan — only employees can.

The Michigan Unemployment Insurance Agency uses the economic reality test to establish whether a worker is an independent contractor or an employee. The test considers the following:

1. - How much control the alleged employer has over the worker’s duties.
  - How the alleged employer pays the worker.
  - The alleged employer’s right to hire and fire and right to discipline.
  - Whether the worker’s duties are an integral part of the alleged employer’s business.

Compensation for Work Injuries

Only employees can apply for workers’ compensation in Michigan.

According to Michigan’s Worker’s Disability Compensation Act of 1969, an employee is anyone who performs services in the course of the trade, profession, business, or occupation of an employer at the time of injury and [2] :

1. - Does not maintain a separate business.
  - Does not market themself as a service provider to the public.
  - Is not an employer subject to this act.

Sample

Below, you can download our free Michigan independent contractor agreement template in PDF or Word format:

Michigan Independent Contractor Agreement