A Pennsylvania independent contractor agreement is a contract that establishes the obligations, deadlines, and scope of an independent contractor’s work. An independent contractor is a business, person, or corporation that provides services or goods to a client. Unlike employees, they do not regularly work for an employer but provide services on their own schedule.
- Worker Classification: A variation of the ABC test
- Tax Structure: Flat Income Tax
- Definition: 77 Pa. Stat. § 22
- At-Will Employment: Yes
Independent Contractor Definition
Under 77 Pa. Stat. § 22, an employee is a person who performs services for another in exchange for money or another type of consideration. The following workers are not considered employees:
- Workers subject to coverage under the Longshore and Harbor Workers’ Compensation Act or the Merchant Marine Act of 1920
- Casually-employed workers
- Workers who are given materials to be cleaned, altered, washed, ornamented, repaired, finished, or adapted for sale in the worker’s own home and are not under the management or control of the employer
Worker Classification Test
Pennsylvania law considers workers to be employees by default. For a worker to be classified as an independent contractor, they must meet both conditions of Pennsylvania’s modified ABC test, which is called the AC test.
A worker must meet the following requirements to be an independent contractor: [1]
- That the worker has been and will continue to be free from the direction and control over the performed services
- That the worker has their own established occupation, trade, business, or profession
Rights and Responsibilities
Employees have more rights than independent contractors in terms of minimum wage requirements and overtime pay. However, independent contractors enjoy some rights, like the ability to accept and reject work and complete work in a manner that suits their schedule and preferences.
State Taxes
Pennsylvanian independent contractors must file their own taxes if they receive more than $33 in total gross taxable income in a calendar year. They should report earned income and incurred expenses using PA-40 Schedule C along with one or more of the following Internal Revenue Service (IRS) documents: [2]
- 1099-K — If the independent contractor earned over $600 in customer payments
- 1099-NEC — If the worker earned over $600 in monetary incentives, such as promotional referrals and sign-up bonuses
- 1099-MISC — If the worker received over $600 in monetary prizes and awards while performing gig work
Filing for Unemployment
Independent contractors cannot file for unemployment in Pennsylvania. Only employees can. Pennsylvania courts use the worker classification test to determine worker status for unemployment purposes. [3]
Compensation for Work Injuries
Only employees are eligible for workers’ compensation. However, Pennsylvania courts look at the following when determining worker status under Pennsylvania workers’ compensation law: [4]
- How much control the alleged employer has over the worker’s services
- Whether the worker is only responsible for the result
- The terms of the agreement between the parties
- The nature of the occupation or work
- The worker’s level of skill
- Whether the worker has their own business or occupation
- Whether the worker’s services are part of the employer’s regular business
- Whether the employer has the right to terminate the employment at any time
Sample
Download our Pennsylvania independent contractor agreement as a PDF or Word file so you can start creating your own:
