A Tennessee independent contractor agreement is a document that governs the work performed by a worker who is not a direct employee of the company. This contract includes the specific services a contractor will perform and the compensation amount they’ll receive from the client.
- Worker Classification: Common Law
- Tax Structure: No State Income Tax
- Definition: TN Code § 50-7-207
- At-Will Employment: Yes
Independent Contractor Definition
An independent contractor has more freedom over their work, including how they complete the work.
Under Tennessee law, an employee is someone over whom the employer has significant control, including control over where and when the employee completes their usual job tasks. If a worker doesn’t meet the conditions of the IRS’s common law 20-factor test, they are an independent contractor.
Worker Classification Test
Before January 1, 2020, Tennessee relied on the ABC test to classify independent contractors and employees. Now, the state uses the IRS’s 20-factor common law test. [1] Some of the factors this test evaluates include:
- The number of instructions and level of training the company provides
- The integration of the worker’s services
- The rendering of the provided services
- Whether the person performing the work can hire and supervise assistants
- The continuing relationship between the two parties
- Whether work hours are set
- Whether the person performing the work must devote full-time hours to those work tasks
- Where the work must be performed
- Whether the worker performs work for more than one entity at the same time
- The conditions to terminate the worker-client/employer relationship
Misclassifying a worker in Tennessee can lead to significant legal and financial penalties for the business. This extensive list of factors ensures that employers have clear guidelines governing when they can count a worker as an independent contractor.
Rights and Responsibilities
Independent contractors have a number of important rights in Tennessee. They get to decide:
- Where and when they perform their work tasks
- Whether they have other employees working for them and to whom they may delegate work tasks
- How many hours they put into the work, as long as the job is completed
- Whether they will perform work for more than one business at the same time
In exchange for these freedoms, independent contractors may not have some of the rights enjoyed by employees, including employee health benefits and overtime pay.
State Taxes
Tennessee does not have a state income tax. However, independent contractors in Tennessee will need to pay federal income taxes. The IRS also notes that independent contractors need to pay a self-employment tax that covers Social Security and Medicare taxes.
Filing for Unemployment
Independent contractors in Tennessee, including all 1099 workers, cannot collect unemployment benefits. [2]
Sample
Review our Tennessee independent contractor agreement below and download it as a PDF or Word file:
