A Virginia independent contractor agreement is a legal contract that specifies the working relationship between an independent contractor and a client, including payment, project scope, and deadlines. It also includes confidentiality clauses and clarifies who owns the final work product.
- Worker Classification: Common Law
- Tax Structure: Graduated-Rate Income Tax
- Definition: Code of Virginia § 58.1-1900
- At-Will Employment: Yes
Independent Contractor Definition
In Virginia, the Department of Taxation presumes that any workers who provide services in exchange for payment are employees. Companies are responsible for proving that the worker is an independent contractor. An independent contractor is an employee who completes tasks while having more independence than a traditional employee and maintaining control over their work process.
Worker Classification Test
Virginia uses the IRS guidance on the common law rules to determine if an individual is an employee or contractor. [1] The IRS guidance considers the following three areas to determine if the worker is an independent contractor:
- Behavioral: whether the company controls or has the power to control how the worker does their work
- Financial: whether the company provides the tools or supplies to do the work, controls how the worker receives pay, and reimburses the worker for expenses
- Type of Relationship: whether the company has an independent contractor agreement with the worker, provides benefits to the worker, or hired the worker for a specific period or indefinitely
Rights and Responsibilities
Virginia workers have a private right of action to sue companies in Virginia courts if companies misclassify the workers as independent contractors. Workers may be eligible to recover employment benefits, salary, wages, and attorney fees or other costs to sue the company if the company misclassified the workers as independent contractors (Code of Virginia § 40.1-28.7:7).
In addition, per the Worker Misclassification statute in the Code of Virginia Sections 58.1-1900 through 58.1-1905:
- Companies may not require a worker to sign an agreement that misclassifies the worker as an independent contractor (Code of Virginia § 58.1-1903).
- Companies may not retaliate against workers who pursue a lawsuit for misclassification (Code of Virginia § 58.1-1904).
State Taxes
Virginia uses the IRS guidance to determine when a person is an employee or independent contractor for state tax purposes (Code of Virginia § 58.1-1900). Companies that misclassify Virginia workers as independent contractors may be responsible for paying penalties.
Employers do not withhold state or federal taxes from payments to their Virginia independent contractors. Independent contractors must pay their own federal, state, and self-employment taxes. Companies must provide their independent contractor with a Form 1099 for work completed in the previous year if they paid the contractor $600 or more.
Filing for Unemployment
Independent contractors do not qualify for unemployment benefits in Virginia. However, the worker may be eligible for unemployment benefits if a company misclassified the worker as an independent contractor.
Sample
Here’s a Virginia independent contractor agreement template, which you download in PDF or Word format below:
