A Texas independent contractor agreement is a document that outlines the services a contractor will provide to a client. The document specifies whether the contractor will provide the services for a set period or until they achieve a specific result. It also lists compensation details, confidentiality clauses, and expense reimbursements.
- Worker Classification: Common Law
- Tax Structure: No State Income Tax
- Definition: TX Lab Code § 201.041
- At-Will Employment: Yes
Independent Contractor Definition
Texas defines employees and independent contractors differently under local law.
Under the Texas Labor Code, employment refers to a service performed by a worker for compensation or under a contract of hire. The government considers this arrangement employment unless the employer can prove otherwise to the Texas Workforce Commission’s satisfaction.
An independent contractor is a compensated worker who the commission decides meets the requirements of the IRS’s right-to-control test. They control their work in a meaningful way, typically supply their own equipment, and dictate their work schedule. They accept self-contained projects and complete short tasks on their own terms to create a satisfactory final product.
Meanwhile, an employee is a compensated worker who doesn’t meet the minimum requirements of the state’s right-to-control test, according to the commission.
Worker Classification Test
Texas courts lay out the method for classifying workers under common law via a variation of the right-to-control test.
In Texas, the right-to-control test is measured by considering 20 factors, some of which include:
- The independent nature of the worker’s business
- The worker’s obligation to provide their own materials, tools, and supplies
- The worker’s right to control the work’s progression, except for the final result
- The length of time the company recruits the worker’s services
- The type of compensation the worker receives
Rights and Responsibilities
In general, Texas workers’ rights stem from their classification as an employee. Independent contractors in Texas generally lack the following protections:
- Overtime pay
- Minimum wage rights
- Most employment benefits like health insurance
Independent contractors in Texas also don’t have access to workers’ compensation insurance. They may purchase their own to give themselves financial protection in case of a work-related accident, but a client may not require them to have it.
State Taxes
Texas doesn’t have a state income tax. However, independent contractors must pay self-employment taxes of 15.3% on earnings of $400 or more. [1]
Filing for Unemployment
The Texas Unemployment Compensation Act (TUCA) only covers employees, so independent contractors are generally ineligible to file for unemployment.
Sample
Below, you can find a Texas independent contractor agreement sample and download it in PDF or Word format:
