Independent Contractor:
What It Means & Who Qualifies

Clients Rate Lawyers on our Platform 4.9/5 Stars
based on 2,247 reviews

Jump to Section

Need help with a legal contract?

Post Project Now

Independent contractors offer a unique skill set to companies, and in exchange, employers save money on labor costs while creating a competitive advantage. However, the employer-independent contractor relationship must follow specific federal rules and may be subject to further state regulations.

The information below contains everything you should know about hiring or working as an independent contractor:

What is an Independent Contractor?

An independent contractor is self-employed individual. They generally function as an entity contracted to offer specialized services as a nonemployee. An independent contractor agreement sets the terms and conditions of the business relationship between the company client and the contracting service provider.

The rights of an independent contractor are essential for employers to honor and recognize, including:

  • Right to contract
  • Right to advertise
  • Right to challenge employment status
  • Right to control
  • Right to make decisions
  • Right to manage own a business
  • Right to receive payment
  • Right to work at will
  • Right to work location
  • Right to work with others

Violating the above-referenced rights can leave employers on the hook for expensive fines and penalties. Regardless of your position, it is critical to recognize these rights and incorporate them into your independent contractor agreements as a matter of practice and formality.

Here is an article that also defines independent contractors.

What Does It Mean To Hire Someone As an Independent Contractor?

Being hired as an independent contractor is when a company employs someone under contract to perform a specific service. However, employers shouldn’t classify independent contractors as employees since they operate as distinct entities, including sole proprietorships and LLCs . Independent contractors can perform various functions involving specialized tasks beyond the scope of the client’s ordinary course of business.

Both parties generally have an independent contractor agreement to govern their relationship, contrasting with private employment. It’s wise for independent contractors to utilize contracts with clients routinely. They allow you to establish relevant and vital terms and conditions, such as when the work period ends, what happens if one party wishes to terminate, and what happens if one party cannot fulfill their duties.

Meet some lawyers on our platform

Tabetha H.

6 projects on CC
View Profile

Gregory B.

42 projects on CC
View Profile

Michael K.

50 projects on CC
View Profile

Samuel R.

22 projects on CC
View Profile

Independent Contractors vs. Employees

Independent contractors provide businesses with flexibility when it comes to staffing. Depending on the client’s needs or the sales volume, they can engage contractors for a specific period while saving time and money in some situations. On the other hand, employees are more expensive with less termination flexibility.

Below, check out additional differences between independent contractors vs. employees:

Difference 1. Location & Hours

In general, contractors decide when, where, and how they work. The location of their work depends on the schedules and demands of their other clients. You do not have to provide an assigned office or designated workspace for contractors.

The work schedule they follow isn’t necessarily traditional either. The type of work or service provided may require independent contractors to work longer hours, including nights and weekends.

Traditionally, employees work at your business location during certain hours or shifts. If they exceed those usual hours, they will earn overtime pay. They will work from dedicated offices or space provided by you.

Difference 2. Control

Independent contractors perform work independently and free from managerial control. It is common for a company to hire contractors for their expertise based on training and experience alone. As such, there is no obligation to train an independent contractor.

In contrast to independent contractors, you have the right to supervise them more closely and require their adherence to internal company policies. Employees are also more likely to have open-ended job descriptions within a specific role.

Difference 3. Resources & Compensation

Contracts or professional service agreements define how much you pay contractors for their services. Payments don’t happen regularly like a salary but upon completion of milestones or stages. Client’s don’t make tax deductions and pay the independent contractor like they would any other invoice.

Clients seldom reimburse independent contractors for expenses such as work clothes, fuel, lunch, or meals. They typically purchase their supplies independently. Contractors also don’t receive paid employment benefits unless they furnish a separate policy.

Employees don’t pay for things like uniforms, supplies, and tools. Instead, the employer is generally responsible for supplying these items. An employer must pay an employee by the hour or as a salaried person and offer them benefits as required under federal and state labor laws.

Difference 4. Employment Laws

Across the United States, law and regulation regulate the employment of employees, including minimum wage, anti-discrimination, and overtime laws. The employee-employer regulatory system generally does not cover independent contractors.

However, employers cannot treat independent contractors like employees. Misclassification of personnel is a significant issue in the US, and infractions can severely punish employers.

For example, California State requires that employers use an ABC Test to determine if an employee is an independent contractor. The ABC Test asks three essential questions as follows:

  • Is the worker free from control?
  • Does the worker offer services beyond the normal scope of business?
  • Is the worker permitted to offer services to others?

If the employer answers “Yes,” to these questions, they must classify the employee as an independent contractor. If they answer “No,” then they must reclassify the independent contractor as an employee. They may also owe misclassified workers benefits and backpay.

Here is an articles that discusses the diffeneces between an independent contractor vs. employee .

What qualifies as a 1099 Employee?

A 1099 employee is an independent contractor, such as freelancers, contractors, and gig workers. We call them “1099 employees” because companies must issue a 1099-MISC tax form to them annually. A written contract usually defines the specific tasks or projects that these workers are hired to accomplish.

Employers must treat 1099 employees just like independent contractors, including freedom from managerial control, the ability to set work hours, and more. A tax attorney can help you generate the legal documents necessary for managing 1099 employees.

ContractsCounsel Independent Contractor Image

Image via Pexels by Snapwire

Examples of Independent Contractors

According to the IRS, you are not an independent contractor if the employer can control the services you perform. Independent contractors are incredibly prevalent in the construction, marketing, technology, and trade industries.

Here is an example of how an independent contractor relationship works:

  • Katherine offers services as a web designer in her area
  • KLM & Co. needs to hire a web designer for a new company website
  • It doesn’t make sense for KLM to hire a private employee for this project
  • KLM eventually connects with Katherine and review her proposal
  • KLM decides to hire Katherine as an independent contractor for the website
  • Katherine drafts an independent contractor agreement and produces it
  • Both parties finalize the agreement by signing it
  • Katherine performs services from her home as described in the contract
  • KLM works in good faith by allowing Katherine to complete the work
  • Upon final approval, Katherine submits an invoice to KLM
  • KLM receives the invoice and pays it
  • Unless KLM hires Katherine for more work, the project concludes

Workers with special skills are frequently self-employed, seeking independent work instead of private employment. Many doctors, lawyers, dentists, and other professionals who provide services to the public are often self-employed. Freelance writers also work as independent contractors.

Get Help With Employment Issues

Several legal issues are surrounding employer-independent contract relationships. As such, legal advice and guidance can help you navigate the associated complexities. Employment lawyers can answer questions and draft independent contractor agreements that are practical for your situation. Post a project for free to get bids from vetted lawyers to help.

How ContractsCounsel Works
Hiring a lawyer on ContractsCounsel is easy, transparent and affordable.
1. Post a Free Project
Complete our 4-step process to provide info on what you need done.
2. Get Bids to Review
Receive flat-fee bids from lawyers in our marketplace to compare.
3. Start Your Project
Securely pay to start working with the lawyer you select.

Meet some of our Lawyers

View Cory
Member Since:
November 29, 2021

Cory B.

Free Consultation
Get Free Proposal
Bellaire, OH
6 Yrs Experience
Licensed in OH
Duquesne University School of Law

Attorney Cory Barack specializes in business, real estate, probate, and energy law. He can help you with oil/gas leases, easements, property sales, drafting contracts and wills, setting up companies, and resolving disputes. He is licensed to practice law in Ohio and is located in Eastern Ohio.

View Cameron
Member Since:
January 24, 2022

Cameron S.

Free Consultation
Get Free Proposal
San Francisco
27 Yrs Experience
Licensed in CA
University of San Francisco

A commercial contracts lawyer with over 25 years of experience (both at large law firms and in-house as general counsel of a public company)

View Brittany
Member Since:
December 4, 2021

Brittany B.

Free Consultation
Get Free Proposal
Ann Arbor, MI
8 Yrs Experience
Licensed in MI
Wayne State University Law School

Brittany advises startups and emerging and public companies at all stages of growth, with focuses on formation and corporate governance matters, securities, venture capital financings, M&A and other strategic transactions, commercial contracts and general corporate counseling. Brittany represents clients across a broad spectrum of industries, including technology, automotive, mobility, digital health, consumer products and manufacturing.

View James
Member Since:
December 5, 2021

James A.

Free Consultation
Get Free Proposal
Birmingham, AL
5 Yrs Experience
Licensed in AL
Birmingham School of Law

James Allen is a native of Birmingham, Alabama. Mr. Allen has a considerable amount of experience in the areas of domestic relations, criminal law, family law, and general civil litigation.

View Emily
Member Since:
December 6, 2021

Emily Y.

Free Consultation
Get Free Proposal
Colorado Springs, Colorado
6 Yrs Experience
Licensed in CO
University of Colorado

I am available to advise on entity formation, contracts, and employment policies. I am also comfortable litigating business disputes including partnership disputes and employment cases. Prior to opening my current practice, I worked for several years in a small civil litigation practice focused on employment matters and civil litigation. I attended law school at the University of Colorado, and I went to the University of British Columbia for my undergraduate education.

View Matthew
Member Since:
December 9, 2021

Matthew H.

Free Consultation
Get Free Proposal
San Diego
6 Yrs Experience
Licensed in CA
Whittier Law School

We are a boutique firm located in San Diego that handles civil litigation with a couple other areas of law.

View Elizabeth
Member Since:
December 11, 2021

Elizabeth W.

Legal Counsel
Free Consultation
Get Free Proposal
Minneapolis, MN
5 Yrs Experience
Licensed in MA, RI
Suffolk University Law School

Liz is an experienced insurance professional, having worked with carriers and brokers for over 10 years. She can review or draft a variety of commercial agreements and is here to help your business. Specialties include: Master Service Agreements, business process outsourcing, marketing and partnership agreements, broker agreements, and NDAs.

View Philip
Member Since:
December 13, 2021

Philip M.

Free Consultation
Get Free Proposal
San Diego
4 Yrs Experience
Licensed in CA
Thomas Jefferson School of Law

I have been a freelance attorney for several years and have many of my clients returning to me for continued work because of the quality I produce.

View Amy Sue
Member Since:
January 4, 2022

Amy Sue L.

President, Concierge Legal
Free Consultation
Get Free Proposal
Washington, DC Metropolitan Area
25 Yrs Experience
Licensed in CA, PA, VA
Pepperdine University School of Law

Ms. Leavens is a corporate attorney with 10 years of experience as the General Counsel, Chief Compliance Officer and Corporate Secretary of a Congressionally chartered, non-profit corporation, and more than 20 years of experience as an advisor to executive officers and boards of directors in for-profit and non-profit organizations. She has substantial experience within in-house legal departments managing cross-functional teams comprised of multiple business units and attorneys on large-scale mission critical projects, and within a global law firm as a manager of public and private, domestic and international, multi-party business transactions. She has unique experience implementing government-sponsored business initiatives. Ms. Leavens was honored in 2015 as one of Washington, D.C.’s Top Corporate Counsel by Bisnow and the Association of Corporate Counsel; nominated in 2014 for the Association of Corporate Counsel (WMACCA) Outstanding Chief Legal Officer Award; and the recipient in 2014 of WMACCA’s Community Service Award.

View Elizabeth
Member Since:
January 5, 2022

Elizabeth V.

Corporate Counsel
Free Consultation
Get Free Proposal
Indianapolis, IN
8 Yrs Experience
Licensed in IN
IU McKinney School of Law

Most of my career has been as in-house counsel for technology companies. My responsibilities included managing all vendor/procurement contracts and compliance, customer/partner/reseller contracts and compliance, data security/privacy compliance and incident responses, HR/employment issues, and legal operations. I am very comfortable negotiating Commercial Contracts, Vendor Agreements, and Procurement Contracts for goods, services, and licensing, as well as addressing Employment & Labor, Intellectual Property, and Data Privacy issues and compliance. I specialized and have a certificate in IP in law school and continued to develop in that area as in-house counsel for Interactive Intelligence, Genesys, which are unified communication companies, and KAR Global in the automobile digital services lines of business.

View Kristen
Member Since:
January 10, 2022

Kristen R.

Freelance Attorney
Free Consultation
Get Free Proposal
14 Yrs Experience
Licensed in WY
University of Wyoming

Transactional and Employment Attorney and Small Business Owner. I do inside counsel work from the outside. I demystify the law for my clients.

Find the best lawyer for your project

Browse Lawyers Now

Want to speak to someone?

Get in touch below and we will schedule a time to connect!

Request a call