While the terms ‘independent contractor’ and ‘employee’ may seem interchangeable to some people, they are not. There is a real and vital distinction between the two terms – this has significant implications for the workers and the business involved.
The Texas Independent Contractor law defines the business relationship between an independent contractor (worker) and the hiring party (business).
With independent contractors, the length of the working relationship is often short-term and clearly defined. The control and direction of the work are decided by the contractor, not the business.
Below, we go a little deeper into the definition of an independent contractor agreement and what to include.
What is an Independent Contractor in Texas?
Based on the Internal Revenue Service (IRS) and federal employment laws, the working status of an independent contractor in Texas is much different from that of an employee. Usually, it is much more than what individuals refer to themselves.
An independent contractor agreement is not by itself a defining authority of an independent contractor. Signing the agreement without fulfilling the other requirements does not automatically change the work status from employee to independent contractor.
The independent contractor agreement Texas law, Texas Unemployment Compensation Act Section 201.041), defines the worker’s service.
Typically, it must be shown to the satisfaction of the Texas Workforce Commission (TWC) that the performance of the services is free from the direction and control of the hiring party. Otherwise, the service performed for wages (express or implied) is employment.
The three essential elements TWC provides for the definition of employment are wages, control, and direction.
The commission uses a20-point comparative approach to distinguish between employment and independent contractor agreement. Checking off most requirements does not automatically make a party an independent contractor. The work status must pass the direction and control test.
Usually, the individual becomes an employee when much of the work’s direction and control is by the business. Some factors, such as a fixed work schedule and job title do not always make a worker an employee.
While the Texas independent contractor agreement law does not provide a clear distinction based on the direction and control test, knowing the available differences is vital.
In a nutshell, an independent contractor:
- Supplies their own equipment
- Controls their work in a meaningful way
- The projects are self-contained and with short tasks
- Non-managerial skills
The business hires an independent contractor temporarily to provide particular services for which they are paid as laid out in the agreement.
Penalties, including increased taxes, interest charges, and fines, apply to employers that misclassify employees.
Independent contractor in Texas is responsible for their own insurance, taxes, and worker’s insurance.
What to Include in a Texas Independent Contractor Agreement?
The various details that an independent contractor agreement Texas template should cover include:
- The status of the contractor, mailing address, and location
- Services to be provided and the period of the contractual relationship
- Compensation (payment and the manner of payment)
- Terms about duties
- Expenses and costs covered (the contractor should be responsible for expenses while performing the services listed in the contract. The costs include vehicle maintenance and repair, travel expenses, insurance premiums, and fees and permits).
- Equipment used
- Confidentiality
- Client and contractor initials
Sample Texas Independent Contractor Agreement
Below you can find a Texas independent contractor agreement that you can download in PDF and Word format:
