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Kentucky Independent Contractor Agreement Template

Kentucky's unemployment law simply adopts the common law rules, but its workers' compensation chapter was written to reach past them, covering anyone performing service in the course of the employer's business with no contract of hire required.

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Introduction

An Independent Contractor Agreement is a contract between a business and a self-employed worker covering scope of work, payment, ownership of the work product, and how the engagement ends. Kentucky imposes no general requirement to have one and prescribes no clause language for it, so the drafting question here is not compliance but exposure, and the exposure is concentrated in one chapter. Kentucky is often grouped with the ABC test states. It is not one. KRS 341.050(1)(a) defines covered employment as service performed by an individual who, under the usual common law rules applicable in determining the employer-employee relationship, has the status of an employee. There is no deemed employment clause and no burden shifting language in the unemployment definition at all. Workers' compensation is where Kentucky diverges sharply. KRS 342.640(1) covers every person in the service of an employer under any contract of hire, and KRS 342.640(4) then covers every person performing service in the course of the trade, business, profession, or occupation of an employer, with no contract of hire required. The Kentucky courts apply that language through the nine factor test drawn from Ratliff v. Redmon, 396 S.W.2d 320 (Ky. 1965), of which four are paramount, and they justified the test by the remedial purpose of Chapter 342, which the courts said favors a different concept of employee from the one applied at common law. The practical consequence for drafting is that a clause which works for one Kentucky act may do very little for another.

Key Things to Know

  1. 1

    Kentucky unemployment insurance uses the common law rules and nothing more. KRS 341.050(1) defines covered employment as service performed by an individual who, under the usual common law rules applicable in determining the employer-employee relationship, has the status of an employee. There is no ABC test, no deemed employment clause, and no provision putting the burden on the employing unit, which sets Kentucky apart from most of its neighbors.

  2. 2

    Three occupational groups are pulled into unemployment coverage by statute regardless of the common law result. KRS 341.050(1)(c) reaches agent-drivers and commission-drivers distributing certain goods and full time traveling or city salesmen, but only where the contract of service contemplates that substantially all of the services be performed personally, the individual has no substantial investment in facilities other than transportation, and the services are part of a continuing relationship rather than a single transaction. Each of those three conditions is something an agreement can address.

  3. 3

    The workers' compensation chapter is deliberately broader than the common law. KRS 342.640(1) covers every person in the service of an employer under any contract of hire or apprenticeship, express or implied. KRS 342.640(4) then covers every person performing service in the course of the trade, business, profession, or occupation of an employer at the time of the injury. Subsection (4) needs no contract of hire at all, which puts a usual course of business concept inside the compensation act.

  4. 4

    The nine factor Ratliff test governs compensation classification, and four factors carry the most weight. Kentucky courts have identified those four as the nature of the work being performed as it relates to the business of the employer, the extent of control exercised by the employer, the professional skill required of the worker, and the true intentions of the parties. The remaining factors cover matters such as distinct occupation or business, who supplies the tools and place of work, length of engagement, and payment by time or by the job.

  5. 5

    A worker's agreement to contractor status does not defeat compensation coverage in Kentucky. The Kentucky courts have held that an employer will not be permitted to force a worker who would normally be considered an employee outside the protection of the Workers' Compensation Act simply because the worker acquiesced in order to obtain the work. A status recital is one input into the intentions factor, not an answer to the question.

  6. 6

    Kentucky has an up the ladder rule that reaches businesses which contract work out. KRS 342.610(2) provides that a person who contracts with another to have work performed consisting of the removal, excavation, or drilling of soil, rock, or mineral, or the cutting or removal of timber from land, or to have work performed of a kind which is a regular or recurrent part of that person's trade, business, occupation, or profession, is deemed a contractor and the other person a subcontractor. That status carries compensation liability for the subcontractor's workers.

  7. 7

    Wage and hour is a different chapter with a different starting point. KRS 337.010(1)(e) defines employee as any person employed by or suffered or permitted to work for an employer, a formulation broader than common law control. Chapter 337 sets no criteria for separating a contractor from an employee, and the Ratliff factors were adopted because of the remedial purpose of Chapter 342 specifically, so a favorable compensation analysis should not be assumed to answer a wage claim. The same subsection carves franchisors and franchisees out of each other's employee status for any purpose under the chapter.

Key decisions before you file

Before you file a Independent Contractor Agreement in Kentucky, a few decisions shape the document: which option to choose and what each one means. The Independent Contractor Agreement guide walks through them.

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Kentucky Independent Contractor Agreement (Compact State Terms)

These are the Kentucky terms only. Read them alongside the national Independent Contractor Agreement, which supplies the parties, services, fees and payment, term, ownership of work product, confidentiality, indemnity, and general provisions. Where a Kentucky term below differs from the national form, use the Kentucky term for work performed in Kentucky.

1. Governing law and place of performance. This Agreement is governed by the laws of the Commonwealth of Kentucky, without regard to its conflict of laws rules. The Services are performed principally at [LOCATION IN KENTUCKY].

2. Common law control (KRS 341.050(1)(a)). Company engages Contractor for a result. Company does not control or direct the details, means, methods, sequence, or hours by which the Services are performed, does not supervise Contractor, and does not impose Company work rules beyond site safety. Contractor may be discharged during the Term only for breach of this Agreement.

3. Facts recorded for the nine factor analysis. The parties record that Contractor: (a) is engaged in a distinct occupation or business offered to other customers; (b) supplies the tools, instrumentalities, and place of work; (c) brings professional skill of a kind ordinarily exercised without supervision; (d) is paid by the job at $______ rather than by time; (e) is engaged for the defined Term rather than indefinitely; and (f) may engage and supervise assistants at Contractor's own expense.

4. Personal performance and investment (KRS 341.050(1)(c)). Contractor is not required to perform the Services personally and may assign qualified personnel to perform them. Contractor maintains a substantial investment in the facilities used in the work, other than in transportation equipment. Contractor is engaged for this project and not as part of a continuing relationship. These are the three conditions that pull agent-drivers, commission-drivers, and traveling or city salesmen into unemployment coverage.

5. Scope of the work relative to Company's business. Where the Services are a regular or recurrent part of Company's own trade or business, the parties acknowledge that KRS 342.640(4) and KRS 342.610(2)(b) may operate regardless of the terms of this Agreement.

6. Contractor's workers and insurance. Contractor shall maintain Kentucky workers' compensation coverage for every person Contractor engages to perform any part of the Services, and shall deliver certificates of that coverage to Company before those persons begin work. Contractor shall indemnify Company for any compensation liability arising from Contractor's failure to do so.

7. Direct seller recital (KRS 341.055(21)). Use this section only where Contractor is a direct seller within the federal definition incorporated there. The Services are performed pursuant to this written contract, and the parties agree that Contractor will not be treated as an employee with respect to the Services for federal tax purposes.

8. Building permit certification (KRS 342.610(6)). Where Contractor is exempt from Chapter 342 and the Services require a building permit, Contractor shall certify that exemption to the local building official in writing on the form prescribed by the commissioner, and shall give Company a copy.

This Kentucky set is general information, not legal advice. Attorney review is available.

Kentucky Requirements for Independent Contractor Agreement

Kentucky Unemployment Insurance Uses the Usual Common Law Rules (KRS 341.050(1)(a))

Covered employment means service performed by an individual who, under the usual common law rules applicable in determining the employer-employee relationship, has the status of an employee. No ABC test applies, no deemed employment clause appears, and the chapter contains no provision shifting the burden onto the employing unit, so the agreement should document the ordinary control indicia rather than address statutory prongs.

Kentucky Statutory Employee Categories Conditioned on Contract Terms (KRS 341.050(1)(c))

Agent-drivers, commission-drivers, and full time traveling or city salesmen are covered employment where the contract of service contemplates that substantially all services be performed personally, the individual has no substantial investment in facilities other than transportation equipment, and the services are part of a continuing relationship rather than a single transaction. An agreement that permits substitution and records the contractor's own investment addresses two of the three conditions directly.

Kentucky Workers' Compensation Coverage Without a Contract of Hire (KRS 342.640(1) and (4))

Subsection (1) covers every person in the service of an employer under any contract of hire or apprenticeship, express or implied, together with helpers and assistants employed with the employer's actual or constructive knowledge. Subsection (4) covers every person performing service in the course of the trade, business, profession, or occupation of an employer at the time of the injury, with no contract of hire required, so no contract term can foreclose it.

Kentucky Nine Factor Test With Four Paramount Factors (Ratliff v. Redmon, 396 S.W.2d 320 (Ky. 1965))

Kentucky applies a nine factor analysis in which four factors are of paramount importance: the nature of the work as it relates to the business of the employer, the extent of control exercised by the employer, the professional skill required of the worker, and the true intentions of the parties. The remaining factors address distinct occupation, local practice, tools and place of work, length of engagement, and method of payment.

Kentucky Acquiescence Does Not Waive Compensation Coverage

Kentucky decisions hold that an employer will not be permitted to force a worker who would normally be considered an employee outside the protection of the Workers' Compensation Act simply because the worker acquiesced in order to obtain the work. Drafting should therefore treat the status recital as evidence of intent rather than as a waiver, and should avoid any language suggesting the worker gives up statutory protection.

Kentucky Up the Ladder Contractor Liability (KRS 342.610(2))

A person who contracts with another to have work performed consisting of the removal, excavation, or drilling of soil, rock, or mineral, or the cutting or removal of timber from land, or to have work performed of a kind which is a regular or recurrent part of that person's trade, business, occupation, or profession, is deemed a contractor and the other person a subcontractor. Require proof of coverage from every party engaging workers under the agreement.

Kentucky Exempt Contractor Certification to the Building Official (KRS 342.610(6))

A person exempt under KRS 342.650(2) and any contractor otherwise exempt from the chapter must so certify to the local building official, in writing and on a form prescribed by the commissioner, in lieu of providing proof of workers' compensation coverage. This is a filing with the permitting authority rather than a term of the agreement, so build it into the project checklist as well as the contract.

Kentucky Wage and Hour Definition Is Suffer or Permit (KRS 337.010(1)(e) and (2)(a))

Employee means any person employed by or suffered or permitted to work for an employer, a broader formulation than common law control, and Chapter 337 supplies no criteria for distinguishing an independent contractor. Because the nine factor compensation test was adopted for Chapter 342 and justified by that chapter's remedial purpose, treat a wage and hour analysis as a separate question rather than a settled one.

Kentucky Franchise Carve-Out From Employee Status (KRS 337.010(1)(e))

Notwithstanding any voluntary agreement entered into between the United States Department of Labor and a franchisee or a franchisor, neither a franchisee nor a franchisee's employee is deemed an employee of the franchisor, and neither a franchisor nor a franchisor's employee is deemed an employee of the franchisee, for any purpose under the wage and hour chapter.

Kentucky Direct Seller Exclusion Requires a Written Contract (KRS 341.055(21))

The unemployment exclusion for service performed by a direct seller adopts the federal definition, which conditions the status on services performed pursuant to a written contract between the person and the person for whom the services are performed, providing that the individual will not be treated as an employee with respect to the services for federal tax purposes. Without that writing and recital the exclusion is unavailable.

Frequently Asked Questions

No. KRS 341.050(1)(a) defines covered employment for unemployment insurance as service performed by an individual who, under the usual common law rules applicable in determining the employer-employee relationship, has the status of an employee. There is no prong structure, no deemed employment language, and no burden shifting provision in the definition, so Kentucky applies ordinary agency principles rather than a statutory ABC test.

Because the statute was written to reach further. KRS 342.640(1) covers every person in the service of an employer under any contract of hire, and KRS 342.640(4) separately covers every person performing service in the course of the trade, business, profession, or occupation of an employer at the time of the injury. Subsection (4) requires no contract of hire, so a worker can fall inside the Act on the nature of the work alone. Kentucky courts have said the purpose of Chapter 342 favors a broader concept of employee than the one applied at common law.

They come from Ratliff v. Redmon, 396 S.W.2d 320 (Ky. 1965), and cover the extent of control the employer may exercise over the details of the work under the agreement, whether the worker is engaged in a distinct occupation or business, whether work of that kind is usually done in the locality under supervision or by a specialist without it, the skill required, who supplies the tools and place of work, the length of the engagement, whether payment is by time or by the job, whether the work is part of the employer's regular business, and whether the parties believe they are creating a master and servant relationship.

Four are treated as paramount: the nature of the work being performed as it relates to the business of the employer, the extent of control exercised by the employer, the professional skill required of the worker, and the true intentions of the parties. The first of those is the reason a contractor doing work at the core of the hiring party's ordinary business faces a harder classification question in Kentucky than one brought in for something the business does not otherwise do.

No. The intentions of the parties are one of the four paramount factors, so a clear and accurate agreement genuinely helps, but Kentucky courts have held that an employer cannot force a worker who would normally be considered an employee outside the protection of the Workers' Compensation Act simply because the worker acquiesced in order to obtain the work. A recital that does not match how the engagement runs adds nothing and can undercut the intentions factor.

Yes, under the up the ladder rule. KRS 342.610(2) deems a person a contractor where that person contracts with another to have work performed consisting of the removal, excavation, or drilling of soil, rock, or mineral, or the cutting or removal of timber, or to have performed work of a kind which is a regular or recurrent part of that person's own trade, business, occupation, or profession. Requiring certificates of coverage from every party bringing workers on site is the practical protection.

Chapter 337 supplies a definition rather than a set of criteria. KRS 337.010(1)(e) defines employee as any person employed by or suffered or permitted to work for an employer, which is broader than common law control, and the chapter sets out no factors for separating contractors from employees. The Ratliff factors were adopted for the workers' compensation chapter and justified by its remedial purpose, so they cannot simply be assumed to answer a wage claim. Where a wage claim is a live risk, attorney review is an option worth taking.

Not as a general rule, and no Kentucky statute prescribes the wording of one. Two narrower requirements exist. The unemployment exclusion for direct sellers at KRS 341.055(21) incorporates a federal definition that requires a written contract providing the individual will not be treated as an employee with respect to the services for federal tax purposes. And KRS 342.610(6) requires a contractor otherwise exempt from the compensation chapter to certify that in writing to the local building official on a form prescribed by the commissioner, in lieu of proof of coverage.

It affects who the employer is rather than whether a worker is a contractor. KRS 337.010(1)(e) provides that notwithstanding any voluntary agreement between the United States Department of Labor and a franchisee or franchisor, neither a franchisee nor a franchisee's employee is deemed an employee of the franchisor, and neither a franchisor nor a franchisor's employee is deemed an employee of the franchisee, for any purpose under the chapter. That is a bar on wage and hour joint employer claims across the franchise line.