North Carolina Independent Contractor Agreement Template

Introduction

Key Things to Know

1. 1

   North Carolina has no ABC test and no employee presumption in any of the three acts. The Employment Security Law contains no burden-shifting language, the Workers' Compensation Act creates no presumption, and the Wage and Hour Act has none either. That makes North Carolina one of the more hiring-party-favorable classification environments in the country, and it also means the hiring party gets no safe harbor to lean on if the facts turn against it.

2. 2

   Unemployment insurance borrows the federal definition and then carves contractors out. N.C. Gen. Stat. 96-1(b)(12) defines employment by reference to section 3306 of the Internal Revenue Code, with additions and exclusions, and 96-1(b)(12)b.1 excludes service performed by an independent contractor. N.C. Gen. Stat. 96-1(b)(19) supplies the definition: an individual who contracts to do work for a person and is not subject to that person's control or direction with respect to the manner in which the details of the work are to be performed or what the individual must do as the work progresses.

3. 3

   Workers' compensation runs the Hayes eight factor test. The person employed is engaged in an independent business, calling, or occupation; has the independent use of special skill, knowledge, or training; is doing a specified piece of work at a fixed price, lump sum, or quantitative basis; is not subject to discharge for adopting one method over another; is not in the regular employ of the other contracting party; is free to use such assistants as he thinks proper; has full control over those assistants; and selects his own time. Hayes states that the presence of no particular one of these indicia is controlling, nor is the presence of all required.

4. 4

   The Workers' Compensation Act's coverage definition is broad and its casual work carve-out is narrow. N.C. Gen. Stat. 97-2(2) reaches every person engaged in an employment under any appointment or contract of hire or apprenticeship, express or implied, oral or written, and excludes persons whose employment is both casual and not in the course of the trade, business, profession, or occupation of the employer. Because that exclusion is conjunctive, casual work that still falls inside the employer's usual trade remains covered.

5. 5

   Wage and hour is the one genuine cross-act gap. The Wage and Hour Act tracks the federal statute in its operative definitions at N.C. Gen. Stat. 95-25.2, defining employ as to suffer or permit to work and employee as any individual employed by an employer, and supplies no contractor definition. The Department of Labor's Wage and Hour Bureau administers the state act using the federal economic reality factors, asking whether the worker, as a matter of economic reality, follows the usual path of an employee and is dependent on the business served. That is a broader and more worker-protective standard than the control test the other two acts use, and because it is borrowed, changes in federal interpretation move the state line without any state legislation.

6. 6

   The Employee Fair Classification Act puts misclassification on the professional license. Under N.C. Gen. Stat. 143-789 every State occupational licensing board or commission must include, on every application for a license, permit, or certification and on every renewal, both a certification by the applicant that the applicant has read and understands the public notice statement and a disclosure by the applicant of any investigations for employee misclassification and the result of those investigations. The sanction is mandatory rather than discretionary: a board shall deny the application of any applicant who fails to comply with the certification and disclosure requirements.

7. 7

   The contract itself is not regulated, with one exception worth knowing. North Carolina does not require a written independent contractor agreement, does not prescribe contract terms, and does not condition any classification presumption on what a contract says. The place where contract language is made load-bearing by statute is the employment service company definition at N.C. Gen. Stat. 96-1(b)(14), whose conditions on negotiating terms, assigning the individual, hiring and terminating, and setting pay must be satisfied both under contract and in fact.

North Carolina Requirements for Independent Contractor Agreement

• North Carolina Unemployment Insurance Control Definition (N.C. Gen. Stat. 96-1(b)(19), 96-1(b)(12))

  Employment is defined by reference to section 3306 of the Internal Revenue Code with statutory additions and exclusions, and service performed by an independent contractor is excluded under 96-1(b)(12)b.1. An independent contractor is an individual who contracts to do work for a person and is not subject to that person's control or direction with respect to the manner in which the details of the work are to be performed or what the individual must do as the work progresses. There is no ABC test and no independent business prong to prove.

• North Carolina Has No Presumption of Employment in Any Act

  The Employment Security Law contains no presumption of employment and no burden-shifting language, the Workers' Compensation Act creates none, and the Wage and Hour Act creates none. In practice the Division of Employment Security makes the determination and the party contesting it carries the appeal burden, while a workers' compensation claimant carries the burden of establishing the employment relationship. Draft the agreement to document the control and independence facts, since there is no statutory presumption to fall back on either way.

• North Carolina Hayes Eight Factor Test for Workers' Compensation (N.C. Gen. Stat. 97-2(2); Hayes v. Board of Trustees of Elon College)

  The Act reaches every person engaged in an employment under any appointment or contract of hire or apprenticeship, express or implied, oral or written, and never defines independent contractor. The Supreme Court's eight indicia are an independent business, calling, or occupation; independent use of special skill, knowledge, or training; a specified piece of work at a fixed price, lump sum, or quantitative basis; not subject to discharge for adopting one method over another; not in the regular employ of the other party; free to use such assistants as he thinks proper; full control over those assistants; and selecting his own time. No one indicium is controlling, nor is the presence of all required. See 224 N.C. 11, 29 S.E.2d 137 (1944).

• North Carolina Casual Employment Exclusion Is Conjunctive (N.C. Gen. Stat. 97-2(2))

  The Workers' Compensation Act excludes persons whose employment is both casual and not in the course of the trade, business, profession, or occupation of the employer. Because both conditions must be satisfied, occasional or short engagements that still fall within the employer's usual trade remain covered. Do not treat brevity or irregularity of the engagement as sufficient by itself to place a worker outside the Act.

• North Carolina Wage and Hour Uses Federal Economic Reality Factors (N.C. Gen. Stat. 95-25.2)

  The Wage and Hour Act defines employ as to suffer or permit to work and employee as any individual employed by an employer, tracking the federal statute and supplying no contractor definition. The Department of Labor's Wage and Hour Bureau administers the state act using the federal economic reality factors, asking whether the worker, as a matter of economic reality, follows the usual path of an employee and is dependent on the business served. Because the standard is borrowed, federal interpretive shifts move the state line without state legislation.

• North Carolina Occupational Licensing Certification and Disclosure (N.C. Gen. Stat. 143-789(a))

  Every State occupational licensing board or commission must include, on every application for a license, permit, or certification and on every renewal, certification by the applicant that the applicant has read and understands the public notice statement, and disclosure by the applicant of any investigations for employee misclassification and the result of the investigations. Treat the disclosure as a recurring obligation that attaches to renewals, not only to a first application.

• North Carolina Mandatory Denial for Non-Compliance (N.C. Gen. Stat. 143-789(b))

  An occupational licensing board or commission shall deny the license, permit, or certification application of any applicant who fails to comply with the certification and disclosure requirements of the section. The consequence is mandatory rather than discretionary, and it operates on the ability to trade rather than through a monetary penalty. Where the contractor's work requires a state license, build a representation and a notice obligation about license status into the agreement.

• North Carolina Public Notice Statement on Misclassification (N.C. Gen. Stat. 143-788(a)(5), 143-786(7))

  The Employee Classification Section is required to create a public notice statement that includes the definition of employee misclassification, and it is that statement which applicants must certify they have read and understand. Employee misclassification is itself defined at N.C. Gen. Stat. 143-786(7). Businesses whose personnel hold state occupational licenses should make sure the people signing renewal forms know what the statement says and what has to be disclosed.

• North Carolina Employment Service Company Conditions Must Hold Under Contract and In Fact (N.C. Gen. Stat. 96-1(b)(14))

  An employment service company is defined by a list of conditions the company must meet both under contract and in fact, covering negotiating the terms of employment, assigning the individual, hiring and terminating, and setting the rate of pay. This is the one statutory place in North Carolina where contract language is expressly made load-bearing, and the qualifier both under contract and in fact means the written terms must be matched by actual practice.