Independent Contractor Agreement (Post-2024 DOL Rule / WHD Guidance)

INDEPENDENT CONTRACTOR AGREEMENT

United States (Federal Framework with State Overlays)

TABLE OF CONTENTS

1. Parties and Recitals
2. Definitions
3. Engagement and Scope of Services
4. Relationship of the Parties -- Independent Contractor Status
5. DOL Economic Reality Test Compliance (Six Factors)
6. IRS Classification Compliance
7. State-Specific Classification Compliance
8. Compensation and Payment Terms
9. Expenses and Equipment
10. Intellectual Property and Work Product
11. Confidentiality and Data Security
12. Insurance and Risk Allocation
13. Indemnification
14. Limitation of Liability
15. Term, Termination, and Transition
16. Representations and Warranties
17. Dispute Resolution
18. General Provisions
19. Classification Documentation Checklist
20. Execution
21. Exhibit A -- Statement of Work
22. Exhibit B -- State-Specific Classification Factors
23. Exhibit C -- Confidentiality Terms
24. Sources and References

1. PARTIES AND RECITALS

This Independent Contractor Agreement (this "Agreement") is entered into as of [__/__/____] (the "Effective Date") by and between:

COMPANY:
| Field | Details |
|-------|---------|
| Legal Name | [________________________________] |
| Entity Type | [________________________________] |
| State of Organization | [________________________________] |
| Principal Address | [________________________________] |
| EIN | [________________________________] |
| ("Company") | |

CONTRACTOR:
| Field | Details |
|-------|---------|
| Legal Name (or Individual) | [________________________________] |
| Entity Type (or Sole Proprietor) | [________________________________] |
| State of Organization | [________________________________] |
| Principal Address | [________________________________] |
| EIN / SSN (for 1099 purposes) | [________________________________] |
| ("Contractor") | |

Recitals

A. Company desires to engage Contractor to perform certain services on an independent contractor basis as described in the Statement of Work (Exhibit A).

B. Contractor represents that it is engaged in an independently established trade, occupation, or business and possesses the skill, experience, equipment, and resources to perform the Services.

C. The parties intend to create an independent contractor relationship and not an employment, agency, partnership, or joint venture relationship.

D. This Agreement is drafted to address compliance with the DOL 2024 Independent Contractor Rule (29 C.F.R. Part 795), the IRS common-law test, and applicable state classification tests, including the ABC test used in certain jurisdictions.

NOW, THEREFORE, the parties agree as follows:

2. DEFINITIONS

"Confidential Information" has the meaning set forth in Exhibit C.

"Contractor Tools" means Contractor's pre-existing tools, templates, methodologies, software, and general know-how used in the performance of services.

"Deliverables" means the specific work product, documents, data, or other materials to be delivered as described in Exhibit A.

"Services" means the services described in Exhibit A.

"Statement of Work" or "SOW" means the description of Services, milestones, deliverables, pricing, and acceptance criteria attached as Exhibit A.

"Work Product" means all Deliverables and other materials created specifically for Company in performing the Services, excluding Contractor Tools.

3. ENGAGEMENT AND SCOPE OF SERVICES

3.1 Services

Contractor shall provide the Services described in Exhibit A. The parties may execute additional SOWs, each of which shall be governed by this Agreement.

3.2 Method and Means

Contractor retains full discretion over the method, manner, means, and timing of performing the Services, subject only to the milestone deadlines, quality standards, and deliverable specifications set forth in Exhibit A. Company may establish what is to be accomplished but shall not direct how Contractor accomplishes it.

3.3 Personnel

Contractor may engage qualified subcontractors or assistants to perform the Services, provided:

(a) Contractor remains fully responsible for the quality and timeliness of all work;
(b) Subcontractors are bound by confidentiality obligations no less restrictive than this Agreement;
(c) Contractor provides a primary point of contact with authority to bind Contractor.

3.4 No Exclusivity

Contractor is free to provide services to other clients during the term of this Agreement, provided such engagements do not create a conflict of interest or breach confidentiality obligations.

3.5 Place of Work

Contractor determines the location from which Services are performed. Company may require Contractor's presence at a specific location only when reasonably necessary for the performance of Services (e.g., on-site installation, client meetings).

4. RELATIONSHIP OF THE PARTIES -- INDEPENDENT CONTRACTOR STATUS

4.1 Independent Contractor

Contractor is an independent contractor and not an employee, agent, joint venturer, or partner of Company. Contractor has no authority to bind Company or make commitments on Company's behalf.

4.2 No Employment Benefits

Contractor is not eligible for any Company employment benefits, including:

☐ Health insurance
☐ Retirement or 401(k) plans
☐ Paid time off, vacation, or sick leave
☐ Workers' compensation
☐ Unemployment insurance
☐ Disability insurance
☐ Any other employee benefit

4.3 Taxes

Contractor is solely responsible for:

(a) All federal, state, and local income taxes;
(b) Self-employment taxes (Social Security and Medicare);
(c) Estimated tax payments;
(d) Any applicable sales, use, or value-added taxes on Services.

Company will issue IRS Form 1099-NEC to Contractor for compensation of $600 or more (or $2,000 or more for payments made after December 31, 2025) during any calendar year.

4.4 No Withholding

Company will not withhold federal, state, or local income taxes, FICA, FUTA, or any other payroll taxes from payments to Contractor.

5. DOL ECONOMIC REALITY TEST COMPLIANCE (SIX FACTORS)

The DOL's 2024 Final Rule (29 C.F.R. Part 795, effective March 11, 2024) applies the "economic reality" test under the FLSA, examining the totality of the circumstances to determine whether a worker is economically dependent on the employer (employee) or in business for themselves (independent contractor).

Note: In May 2025, the DOL announced it would no longer enforce the 2024 Rule and reverted to earlier enforcement guidance (WHD Memo 2025-1). However, the 2024 Rule remains in effect for purposes of private litigation under the FLSA. This Agreement addresses both frameworks.

Factor 1: Opportunity for Profit or Loss Depending on Managerial Skill

Contractor represents that Contractor has the opportunity to profit or suffer loss from this engagement based on Contractor's managerial decisions, including:

☐ Contractor negotiated the fee/rate for this engagement.
☐ Contractor can accept or decline engagements.
☐ Contractor can hire helpers or subcontract work.
☐ Contractor determines the order and priority of tasks.
☐ Contractor markets services to other clients.
☐ Contractor's profit depends on efficiency and cost management.

Factor 2: Investments by the Worker and the Company

Contractor has made capital or entrepreneurial investments, including:

☐ Business equipment (computers, tools, software): [________________________________]
☐ Office space or workspace maintained by Contractor
☐ Insurance (general liability, professional liability, etc.)
☐ Training and professional development (self-funded)
☐ Marketing and business development
☐ Business entity formation and maintenance costs
☐ Other: [________________________________]

Factor 3: Degree of Permanence of the Work Relationship

☐ This engagement is for a defined project with a specific end date.
☐ This engagement is for a defined scope that will conclude upon completion.
☐ The relationship is not indefinite or exclusive.

Factor 4: Nature and Degree of Control

Company's control is limited to specifying:
☐ What deliverables are expected (not how to produce them)
☐ Quality standards and specifications
☐ Milestone deadlines

Contractor controls:
☐ Hours and schedule
☐ Methods and processes
☐ Tools and equipment used
☐ Location of work
☐ Hiring and management of assistants/subcontractors

Factor 5: Extent to Which the Work is Integral to Company's Business

☐ The Services are ancillary or supplemental to Company's core business operations.
☐ The Services relate to a specialized project outside Company's ordinary capabilities.
☐ If the Services are integral to Company's business, Contractor's independence is supported by other factors demonstrating Contractor operates an independent business.

Factor 6: Skill and Initiative

☐ Contractor possesses specialized skill, expertise, or certification: [________________________________]
☐ Contractor exercises business judgment and initiative in performing the Services.
☐ Contractor markets similar services to the general public or other clients.

6. IRS CLASSIFICATION COMPLIANCE

6.1 IRS Three-Category Test

The IRS uses a common-law test examining three categories:

(a) Behavioral Control: Company does not have the right to direct or control how Contractor performs the Services. Contractor determines the method, order, and timing of work.

(b) Financial Control: Contractor has a significant investment in equipment and tools, is not reimbursed for ordinary expenses, has the opportunity for profit or loss, makes services available to the market, and is paid per project or milestone (not hourly/salary with guaranteed minimum).

(c) Relationship of the Parties: This Agreement reflects the intent to create an independent contractor relationship. Contractor does not receive benefits. The relationship is not permanent or indefinite.

6.2 Form W-9 / Tax Identification

Contractor shall provide a completed IRS Form W-9 (or W-8 for non-U.S. persons) before the first payment.

7. STATE-SPECIFIC CLASSIFICATION COMPLIANCE

7.1 ABC Test States

Several states apply a stricter ABC test that presumes workers are employees unless all three prongs are met:

(A) The worker is free from control and direction of the hiring entity in performing the work;
(B) The worker performs work that is outside the usual course of the hiring entity's business; and
(C) The worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed.

ABC Test States include: California (AB5/Prop 22), Massachusetts, New Jersey, Illinois, Connecticut, Vermont, and others. Additional states apply the ABC test for certain purposes (unemployment, workers' compensation).

7.2 State Classification Assessment

See Exhibit B for detailed state-specific classification factors and disclosures.

7.3 Reclassification Risk

If any federal, state, or local agency determines that Contractor is an employee, the parties agree to cooperate in good faith to restructure the relationship to comply with applicable law, or to terminate the relationship as necessary.

8. COMPENSATION AND PAYMENT TERMS

8.1 Fees

Company shall pay Contractor the fees set forth in Exhibit A.

8.2 Invoicing

Contractor shall submit detailed invoices [________________________________] (e.g., monthly, upon milestone completion), including:

• Description of Services performed
• Hours worked (if hourly) or milestones achieved
• Reimbursable expenses (if approved in Exhibit A)
• Total amount due

8.3 Payment Terms

Company shall pay approved invoices within [____] days of receipt.

8.4 Late Payment

Amounts unpaid after [____] days shall accrue interest at [____]% per annum, not to exceed the maximum rate allowed by law.

8.5 No Minimum Hours

Company does not guarantee a minimum number of hours, projects, or payments.

9. EXPENSES AND EQUIPMENT

9.1 Contractor's Responsibility

Contractor is responsible for all ordinary business expenses incurred in performing the Services, including:

☐ Computer hardware and software
☐ Office space and utilities
☐ Transportation
☐ Communication costs
☐ Insurance premiums
☐ Professional licensing and continuing education

9.2 Pre-Approved Reimbursable Expenses

Only the following categories of expenses are reimbursable, and only if pre-approved in writing by Company:

☐ Travel expenses for required on-site work: ☐ Yes ☐ No
☐ Specialized materials or supplies: ☐ Yes ☐ No
☐ Other: [________________________________]

10. INTELLECTUAL PROPERTY AND WORK PRODUCT

10.1 Pre-Existing Materials

Each party retains ownership of intellectual property created before the Effective Date or outside the scope of the Services.

10.2 Work Product Assignment

Subject to full payment, Contractor hereby assigns to Company all right, title, and interest in the Work Product, including all copyrights, patents, and other IP rights.

10.3 Contractor Tools License

Contractor retains ownership of Contractor Tools. To the extent Contractor Tools are incorporated into the Work Product, Contractor grants Company a perpetual, royalty-free, non-exclusive license to use such Contractor Tools as part of the Work Product.

10.4 Moral Rights Waiver

Contractor waives any moral rights in the Work Product to the extent permitted by law.

10.5 Further Assurances

Contractor shall execute documents reasonably necessary to perfect Company's IP rights.

11. CONFIDENTIALITY AND DATA SECURITY

11.1 Confidential Information

The parties shall comply with the confidentiality terms in Exhibit C or an existing NDA between the parties.

11.2 Data Security

Contractor shall implement administrative, physical, and technical safeguards appropriate to the sensitivity of Company data. Contractor shall notify Company of any security incident within [____] hours of discovery.

11.3 Return of Property

Upon termination, Contractor shall return or securely destroy all Company Confidential Information and certify compliance in writing.

11.4 DTSA Notice

Per 18 U.S.C. § 1833(b): Disclosures to government officials or attorneys for reporting suspected violations of law, or in sealed court filings, are protected.

12. INSURANCE AND RISK ALLOCATION

12.1 Contractor's Insurance

Contractor shall maintain at its own expense:

Contractor shall provide certificates of insurance upon request.

12.2 No Workers' Compensation from Company

Contractor acknowledges that Contractor is not covered by Company's workers' compensation insurance. Contractor is responsible for obtaining its own coverage as required by law.

13. INDEMNIFICATION

13.1 Mutual Indemnification

Each party shall indemnify, defend, and hold harmless the other party and its officers, directors, employees, and agents from all third-party claims, losses, damages, liabilities, costs, and expenses (including reasonable attorney fees) arising from:

(a) The indemnifying party's negligence or willful misconduct;
(b) The indemnifying party's breach of this Agreement;
(c) The indemnifying party's violation of applicable law.

13.2 Contractor's Additional Indemnification

Contractor shall additionally indemnify Company from claims arising from:

(a) Any assertion by a governmental agency that Contractor or Contractor's personnel are employees of Company;
(b) Contractor's failure to pay taxes or obtain required insurance;
(c) Contractor's subcontractors' acts or omissions.

14. LIMITATION OF LIABILITY

Except for indemnification obligations, IP infringement, confidentiality breaches, and willful misconduct, each party's aggregate liability under this Agreement shall not exceed [____] times the total fees paid or payable under this Agreement.

NEITHER PARTY SHALL BE LIABLE FOR CONSEQUENTIAL, INCIDENTAL, INDIRECT, SPECIAL, OR PUNITIVE DAMAGES, except in cases of willful misconduct or breach of confidentiality.

15. TERM, TERMINATION, AND TRANSITION

15.1 Term

This Agreement commences on the Effective Date and continues until:

☐ Completion of the Services described in Exhibit A.
☐ [__/__/____] (fixed end date), unless renewed by mutual written agreement.
☐ Terminated as provided herein.

15.2 Termination for Convenience

Either party may terminate upon [____] days' written notice. Company shall pay for Services performed and approved expenses through the termination date.

15.3 Termination for Cause

Either party may terminate immediately upon written notice if the other party:

(a) Materially breaches this Agreement and fails to cure within [____] days of written notice;
(b) Becomes insolvent, files for bankruptcy, or has a receiver appointed;
(c) Engages in fraud, gross negligence, or willful misconduct.

15.4 Transition Assistance

Upon termination, Contractor shall provide reasonable transition assistance for up to [____] days at the rates set forth in Exhibit A.

15.5 Survival

Sections 10 (IP), 11 (Confidentiality), 12 (Insurance), 13 (Indemnification), 14 (Limitation of Liability), and 17 (Dispute Resolution) survive termination.

16. REPRESENTATIONS AND WARRANTIES

16.1 Contractor Represents and Warrants

(a) Contractor is an independently established business with the skill, experience, and resources to perform the Services;
(b) Contractor maintains all licenses and permits required to perform the Services;
(c) Contractor will perform the Services in a professional and workmanlike manner;
(d) The Work Product will not infringe any third-party IP rights;
(e) Contractor is not bound by any agreement that would prevent performance of this Agreement;
(f) Contractor has properly classified all of its own workers.

16.2 Company Represents and Warrants

(a) Company has the authority to enter into this Agreement;
(b) Company will provide necessary information and access for Contractor to perform the Services;
(c) Company will pay Contractor in accordance with Section 8.

17. DISPUTE RESOLUTION

17.1 Escalation

Disputes shall first be escalated to senior executives of each party for good-faith negotiation for a period of [____] days.

17.2 Mediation / Arbitration

☐ Mediation then Arbitration – If unresolved, disputes shall be submitted to mediation, followed by binding arbitration administered by [________________________________] in [________________________________].

☐ Litigation – Disputes shall be resolved in the state or federal courts located in [________________________________].

17.3 Governing Law

This Agreement is governed by the laws of the State of [________________________________], without regard to conflict-of-laws rules.

17.4 Equitable Relief

Nothing herein prevents either party from seeking injunctive relief in a court of competent jurisdiction.

18. GENERAL PROVISIONS

18.1 Entire Agreement. This Agreement and its Exhibits constitute the entire agreement and supersede all prior agreements.

18.2 Amendments. Must be in writing signed by both parties.

18.3 Notices. Written notices to the addresses above via certified mail, courier, or email with confirmation.

18.4 Assignment. Contractor may not assign without Company's written consent, except to an entity that acquires all or substantially all of Contractor's business. Company may assign to an Affiliate or successor.

18.5 Severability. Invalid provisions do not affect remaining provisions.

18.6 Counterparts. May be executed in counterparts; electronic signatures are binding.

18.7 Force Majeure. Neither party is liable for failure to perform due to events beyond reasonable control, provided prompt notice and commercially reasonable efforts to resume.

18.8 Compliance Review. The parties agree to review the classification at least annually and whenever material facts change, to ensure continued compliance with applicable law.

19. CLASSIFICATION DOCUMENTATION CHECKLIST

Complete this checklist and retain in your files to document the independent contractor classification:

Pre-Engagement

☐ Contractor has an independently established business (business license, entity formation, or DBA)
☐ Contractor markets services to the general public or multiple clients
☐ Contractor provides own tools, equipment, and workspace
☐ Contractor has its own insurance (general liability, professional liability)
☐ Contractor has provided a completed IRS Form W-9
☐ State-specific classification analysis completed (Exhibit B)

During Engagement

☐ Contractor sets own hours and schedule
☐ Contractor controls methods and processes
☐ Contractor submits invoices (not a timesheet processed through payroll)
☐ No Company benefits are provided to Contractor
☐ Contractor is not supervised like an employee
☐ Contractor has opportunity for profit or loss

Upon Termination

☐ Form 1099-NEC issued for applicable tax year
☐ Confidential Information returned or destroyed
☐ Classification review completed for any successor engagement

20. EXECUTION

IN WITNESS WHEREOF, the parties execute this Agreement as of the Effective Date.

COMPANY

Signature: ________________________________________

Printed Name: [________________________________]

Title: [________________________________]

Date: [__/__/____]

CONTRACTOR

Signature: ________________________________________

Printed Name: [________________________________]

Title (if entity): [________________________________]

Date: [__/__/____]

EXHIBIT A -- STATEMENT OF WORK

Scope of Services

[________________________________]
[________________________________]
[________________________________]

Milestones and Deliverables

Acceptance Criteria

[________________________________]

Reimbursable Expenses (if any)

[________________________________]

EXHIBIT B -- STATE-SPECIFIC CLASSIFICATION FACTORS

Instructions

Complete this exhibit for each state where Contractor will perform Services. Consult state-specific legal counsel.

State: [________________________________]

EXHIBIT C -- CONFIDENTIALITY TERMS

☐ Separate NDA governs – NDA dated [__/__/____] between the parties is incorporated by reference.

☐ The following terms apply:

"Confidential Information" means all non-public information disclosed by either party, including business plans, customer data, technical information, financial data, and trade secrets.

Obligations: The receiving party shall: (a) hold Confidential Information in strict confidence; (b) use it only for the purposes of this Agreement; (c) not disclose to third parties without prior written consent; (d) protect with no less than reasonable care.

Exceptions: (a) Publicly available; (b) independently developed; (c) lawfully obtained from a third party; (d) required by law (with notice).

Duration: Obligations survive for [____] years after disclosure, except trade secrets which are protected for as long as they qualify as trade secrets.

24. SOURCES AND REFERENCES

• 29 C.F.R. Part 795 – DOL 2024 Independent Contractor Rule: https://www.federalregister.gov/documents/2024/01/10/2024-00067/employee-or-independent-contractor-classification-under-the-fair-labor-standards-act
• DOL WHD Memo 2025-1 – Enforcement guidance
• 29 U.S.C. § 201 et seq. – Fair Labor Standards Act
• 26 U.S.C. § 3509 – IRS worker classification tax liability
• IRS Publication 15-A – Employer's Supplemental Tax Guide: https://www.irs.gov/pub/irs-pdf/p15a.pdf
• IRS Form 1099-NEC: https://www.irs.gov/forms-pubs/about-form-1099-nec
• IRS Form W-9: https://www.irs.gov/forms-pubs/about-form-w-9
• 18 U.S.C. § 1836 et seq. – Defend Trade Secrets Act
• California AB5 / Prop 22 – California ABC test
• Massachusetts G.L. c. 149 § 148B – Massachusetts ABC test
• New Jersey ABC Test – N.J.S.A. 43:21-19(i)(6)

This template is provided by ezel.ai for informational purposes only. It does not constitute legal advice. Worker classification involves overlapping federal, state, and local tests. The DOL 2024 Rule remains relevant for private litigation. Always consult a licensed attorney in the applicable jurisdiction(s) before engaging independent contractors.