A Montana independent contractor agreement establishes the terms and conditions of employment for an independent contractor. In Montana, anyone who is not an employee of the company they are working for must obtain an independent contractor exemption certificate (ICEC) or provide their own workers’ compensation insurance to avoid fines and penalties.
- Worker Classification: ABC Test
- Tax Structure: Graduated-Rate Income Tax
- Definition: § 39-71-417, § 24.35.101(7)
- At-Will Employment: No
Independent Contractor Definition
An employee is any individual who performs services for another individual or entity with a right to control the worker regarding the nature of the services and the performance outcome. Their employer must withhold state and federal taxes and may provide other benefits such as insurance, vacation, or pension plans [1] .
Independent contractors are required to provide proof of independent business operation to any employer in Montana.
Worker Classification Test
Montana uses parts A and C of the ABC test to determine whether an individual is an independent contractor or an employee. An employer must show:
- That the worker is free of all direction and control by the employer based on their contract and in fact.
- The worker is engaged in an independent trade, profession, business, or trade outside the employer’s business.
- The worker has a valid ICEC or a self-elected workers’ compensation policy.
Rights and Responsibilities
An independent contractor can be fined up to $1000 per violation for misrepresenting their status or performing work without an ICEC [2] .
State Taxes
Independent contractors must pay their own state and federal income taxes. They may need to pay business taxes if they are registered as sole proprietorships or partnerships. Independent contractors should consult an accountant or attorney when filing their tax documents.
Filing for Unemployment
Independent contractors cannot file for unemployment insurance in Montana. If you are a 1099 worker and have been told you are an independent contractor, you should contact the Montana Department of Labor & Industry to determine your status. Not all 1099 workers are independent contractors.
Compensation for Work Injuries
Montana has a separate Labor and Industry division to oversee the rights of independent contractors. The Independent Contractor Central Unit (ICCU) [3] ensures all independent contractors comply with Montana workers’ compensation laws and investigate employment relationship conditions.
Employers who misclassify workers to avoid taxes or attempt to exercise undue control over an independent contractor may face penalties and fines up to $1000 per violation. Workers who believe their employer is in violation of an independent contractor agreement should contact the ICCU so that the complaint can be investigated.
Sample
Download our free Montana independent contractor agreement template below and start creating your contract.
