A Utah independent contractor agreement is a document outlining the relationship between a contractor and a client. In addition to explaining the services the contractor will provide, this document lists payment details, the proposed timeline for the contractor’s work, and intellectual property rights.
- Worker Classification: A variation of the ABC test
- Tax Structure: Flat Income Tax Rate
- Definition: UT Code § 35A-4-204
- At-Will Employment: Yes
Independent Contractor Definition
Independent contractors are workers classified by Utah as independent contractors under the criteria set forth by the state. They complete their work free from the company’s control, so they have a lot of flexibility in how they complete an assignment as long as the final product is satisfactory.
Employees are paid workers who cannot be or haven’t yet been classified as independent contractors in Utah.
Worker Classification Test
Utah uses a modified ABC test to determine whether to classify a worker as an employee or an independent contractor. Utah considers a worker who performs services for wages under contract an employee unless you can prove the following two points to the Utah State Tax Commission’s satisfaction: [1]
Point 1: The worker is normally engaged in an independently established profession, trade, occupation, or business of the same nature as that involved in their contract.
Independently Established Profession
The commission will consider the following:
- Whether the worker’s independently established business exists apart from the relationship between them and their client
The commission will consider the following factors:
- Where the worker conducts business
- Whether the worker supplies their own tools and materials
- Whether the worker has other clients
- Whether the worker can experience a profit or loss
- Whether the worker advertises their services
- Whether the worker holds professional licenses
- Whether the worker maintains business records and tax forms
If a client can prove to the commission that a worker is regularly engaged in independent work, the commission will presume the client doesn’t have direction or control over the service.
Point 2: The worker is free from control and direction over their work performance, both in fact and under their contract of hire.
Direction and Control
The commission will consider the following:
- Whether a business retains the right to direct and control the performance of the worker’s service.
The commission will use the following factors to determine a company’s direction and control over a worker’s services:
- Instructions provided to the worker
- Training provided to the worker
- A company’s direction and control over the pace and sequence of the service
- Whether the worker performs the work at the company’s premises
- Whether the worker retains the right to outsource the service
- Whether a continuous relationship exists between the two parties
- Whether the company sets specific hours or a required amount of time for the worker’s projects
- The method and frequency of payment
Rights and Responsibilities
In Utah, like in other states, most workers’ rights come from the workers’ classification as an employee. Independent contractors in Utah generally do not have the following rights:
- Overtime pay
- Workers’ compensation rights
- Minimum wage rights
- Unemployment benefits
State Taxes
Independent contractors are responsible for paying the federal self-employment tax rate of 15.3%. They also pay the state’s flat income tax rate of 4.85%. [2]
Filing for Unemployment
Independent contractors in Utah are generally ineligible to file for unemployment benefits.
Sample
Download a Utah independent contractor agreement template in PDF or Word format below:
