A Vermont independent contractor agreement is a document that defines the relationship between a client and a contractor. The contractor provides services to the client, but the work they produce doesn’t directly align with the company’s main functions.
- Worker Classification: ABC Test
- Tax Structure: Graduated-Rate Income Tax
- Definition: 21 V.S.A. § 1301
- At-Will Employment: Yes
Independent Contractor Definition
Vermont law considers a worker to be an employee until proven otherwise. Independent contractors are workers who can satisfy all three prongs of the ABC test, while employees are all workers who don’t satisfy all three conditions of the ABC test.
Worker Classification Test
Vermont uses the ABC test to determine a worker’s classification as an employee or an independent contractor.
The ABC Test has three prongs:
- Prong A considers whether the worker is free from control and direction over how they perform their services to a company.
- Prong B considers whether the worker’s service is either performed outside the normal course of the business or is physically performed outside the business location.
- Prong C considers whether the worker is normally engaged in an independent profession, trade, business, or occupation.
If a worker meets all these conditions, the state of Vermont would consider them an independent contractor. If a worker fails even one prong, they’d most likely be considered an employee.
Rights and Responsibilities
Most of the rights Vermont workers enjoy come from their classification as employees. Vermont’s independent contractors generally lack the following rights:
- Minimum wage rights
- Overtime rights
- Worker’s compensation rights
- Unemployment benefits rights
If a worker files a benefits claim as an independent contractor, the Vermont government will investigate the worker’s classification. This could result in serious penalties for the employer if the employer has misclassified the worker.
State Taxes
Vermont defers to the IRS criteria for worker classification.
Vermont has a graduated income tax rate. The rates range from 3.35% to 8.75%. The state also has a graduated corporate income tax that could apply to some independent contractors. Vermont’s graduated corporate income tax ranges from 6.0% to 8.5%. [1]
Independent contractors should also be aware of the federal self-employment tax rate of 15.3%. This tax applies to earnings over $400.
Filing for Unemployment
Independent contractors generally cannot file for unemployment in Vermont.
Compensation for Work Injuries
Independent contractors don’t qualify for workers’ compensation. However, they can purchase their own workers’ compensation policy to receive financial protection in case they sustain an injury while they’re performing work for a client.
Sample
View a Vermont independent contractor agreement template below and download it as a PDF or Word file:
