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South Dakota Independent Contractor Agreement Template

South Dakota is one of the few states where the right piece of paper actually moves the presumption, and there are two separate pieces of paper.

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Introduction

An Independent Contractor Agreement is a contract between a business and a self-employed worker covering scope, payment, ownership of the work product, and how the engagement ends. Classification in South Dakota is decided by a legal test rather than by the title on the document, and the test is short: SDCL 61-1-11 treats service for wages as employment unless it is shown to the Department of Labor and Regulation that the worker is free from control over performance, both under the contract of service and in fact, and is customarily engaged in an independently established trade, occupation, profession, or business. Two prongs, both required, with no outside-the-usual-course prong. The South Dakota Supreme Court carried the same two factors into workers' compensation in Egemo v. Flores, so the substantive question does not change between the two acts. What is distinctive is that South Dakota then gives the parties two document schemes that change the legal starting point. A notarized affidavit of exempt status under SDCL 62-1-19 creates a rebuttable presumption that the signer is not an employee, and for trucking owner-operators a written contract reciting independent contractor status under SDCL 62-1-11(6) is a precondition to a departmental certificate that is then binding upon the parties. Both are narrow, and neither is a substitute for how the work is actually done.

Key Things to Know

  1. 1

    SDCL 61-1-11 states the test as two prongs joined by and: the individual has been and will continue to be free from control or direction over the performance of the service, both under the contract of service and in fact, and the individual is customarily engaged in an independently established trade, occupation, profession, or business. There is no third prong about the usual course of the hiring business, which makes this narrower than a full ABC test.

  2. 2

    The presumption runs against the hiring party for unemployment purposes. Service for wages is employment subject to the title unless and until it is shown to the satisfaction of the Department of Labor and Regulation that both prongs are met, so the business carries the burden and failing either prong is enough to lose.

  3. 3

    Workers' compensation uses the same two factors. In Egemo v. Flores, 470 N.W.2d 817 (S.D. 1991), the Supreme Court applied the two factors drawn from In re Appeal of Hendrickson's Health Care Service to a workers' compensation appeal and noted that the statutory scheme presumes an individual to be an employee until status as an independent contractor is established.

  4. 4

    Wage claims run on their own definition and their own burden. SDCL 60-1-1 defines an employee as a person employed to render personal service to an employer otherwise than in the pursuit of an independent calling and who in such service remains entirely under the control and direction of the employer. The SDCL 61-1-11 burden shift is expressly confined to Title 61, so it does not carry over to a Title 60 wage claim. South Dakota also has no state overtime statute, which leaves overtime to the Fair Labor Standards Act.

  5. 5

    The affidavit of exempt status is the unusual part. Under SDCL 62-1-19 an independent contractor who is not an employer or general contractor and is not covered by a workers' compensation policy may sign one, and it creates a rebuttable presumption that the affiant is not an employee. SDCL 62-1-20 dictates the document itself: it must be on a form prescribed by the director of the Division of Insurance, must be notarized, must contain eight enumerated acknowledgment statements, and must have the exempt status fact sheet attached.

  6. 6

    Two limits sit alongside the affidavit and are easy to miss. SDCL 62-1-21 makes knowingly providing false information on it a Class 2 misdemeanor. SDCL 62-1-22 provides that no employer or general contractor is required to accept the affidavit as a substitute for a certificate of coverage, so a hiring business can still insist on proof of insurance.

  7. 7

    Trucking owner-operators run on a second, stricter scheme. Under SDCL 62-1-10 to 62-1-12 an owner-operator of a licensed truck, road tractor, or truck tractor is an independent contractor for workers' compensation only after applying for and receiving a certificate of independent contractor status, and one of the six conditions the parties must document is SDCL 62-1-11(6): the owner-operator enters into a written contract which specifies the relationship to be that of an independent contractor and not that of an employee. Once issued, and absent changed circumstances, the certificate is binding upon the parties on the issue of independent contractor status and must be kept with the vehicle.

Key decisions before you file

Before you file a Independent Contractor Agreement in South Dakota, 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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South Dakota Independent Contractor Agreement (Compact State Terms)

This is the South Dakota clause set, read together with the main Independent Contractor Agreement, which carries scope, deliverables, fees, ownership of work product, confidentiality, indemnity, and the general provisions. Only the South Dakota terms appear below, and they control where they conflict.

S1. The Two Prongs

SDCL 61-1-11 treats service for wages as employment unless the Department of Labor and Regulation is satisfied that the individual is free from control over performance, both under the contract of service and in fact, and is customarily engaged in an independently established trade, occupation, profession, or business. Egemo v. Flores applies the same two factors in workers' compensation. Both must hold, so the Parties record and operate as follows.

(a) Freedom from control. Contractor sets the means, manner, methods, sequence, and hours of the work. Company states the result required and the date it is due.

(b) Independent business. Contractor holds out to the public as an independent business, is free to accept work from others, supplies Contractor's own tools and equipment, and bears the opportunity for profit and the risk of loss. Business name, license, or registration: ______.

S2. Affidavit of Exempt Status (SDCL 62-1-19 to 62-1-22)

Where Contractor is not an employer or general contractor and is not covered by a workers' compensation policy, Contractor may sign an affidavit of exempt status, which creates a rebuttable presumption that Contractor is not an employee. The affidavit must be on the form prescribed by the director of the Division of Insurance, must be notarized, must carry the eight acknowledgments listed in SDCL 62-1-20, and must have the exempt status fact sheet attached. Knowingly providing false information on it is a Class 2 misdemeanor under SDCL 62-1-21. Under SDCL 62-1-22 Company is not required to accept it in place of a certificate of coverage.

Completed and notarized affidavit delivered to Company, dated ____________: yes ____ no ____.

S3. Trucking Owner-Operator Certificate (SDCL 62-1-10 to 62-1-12)

Where Contractor is the owner-operator of a licensed truck, road tractor, or truck tractor, independent contractor status for workers' compensation depends on a certificate from the Department of Labor and Regulation, and SDCL 62-1-11(6) makes this Agreement part of the application. The Parties therefore specify that the relationship created is that of an independent contractor and not that of an employee, and shall file the documentation the Department requires. Once issued, and absent changed circumstances, the certificate is binding upon the Parties on that issue and shall be kept with the vehicle.

S4. Wages, Taxes, and Governing Law

Wage claims run on a separate definition: SDCL 60-1-1 asks whether the person renders personal service otherwise than in the pursuit of an independent calling and remains entirely under the control and direction of the employer, and the SDCL 61-1-11 burden shift does not reach it. Contractor pays all taxes on amounts paid, and Company withholds nothing. This Agreement is governed by South Dakota law.

Signatures

Company: ______________________________ Date: ____________

Contractor: ______________________________ Date: ____________

This South Dakota clause set is general information, not legal advice; attorney review is available.

South Dakota Requirements for Independent Contractor Agreement

South Dakota Two-Prong Test for Unemployment (SDCL 61-1-11)

Service performed by an individual for wages is employment subject to the title unless and until it is shown to the satisfaction of the Department of Labor and Regulation that the individual has been and will continue to be free from control or direction over the performance of the service, both under the contract of service and in fact, and that the individual is customarily engaged in an independently established trade, occupation, profession, or business. Both prongs are required and the burden sits with the hiring party.

South Dakota Applies the Same Two Factors to Workers' Compensation (Egemo v. Flores, 470 N.W.2d 817 (S.D. 1991))

The Supreme Court applied the two factors drawn from In re Appeal of Hendrickson's Health Care Service, 462 N.W.2d 655 (S.D. 1990), to a workers' compensation appeal, and observed that the statutory scheme presumes an individual to be an employee until status as an independent contractor is established, citing SDCL 61-1-11 and SDCL 62-1-3. The substantive test therefore does not change between unemployment and workers' compensation.

South Dakota Affidavit of Exempt Status Creates a Presumption (SDCL 62-1-19)

An independent contractor who is not an employer or general contractor and is not covered by a workers' compensation policy may sign an affidavit of exempt status, and the affidavit creates a rebuttable presumption that the affiant is not an employee. It is the rare document in this area that changes the legal starting point rather than simply recording the parties' intent.

South Dakota Prescribed Form and Notarization for the Affidavit (SDCL 62-1-20)

The affidavit must be on a form prescribed by the director of the Division of Insurance and must be notarized. It must contain eight enumerated acknowledgment statements and must have attached an exempt status fact sheet that delineates the legal requirements recognized in law for determining whether a person is an independent contractor. A privately drafted substitute does not carry the presumption.

South Dakota False Statements on the Affidavit (SDCL 62-1-21)

Knowingly providing false information on the affidavit of exempt status is a Class 2 misdemeanor. Because the affidavit asks the signer to acknowledge facts about having no employees, holding no coverage, and operating independently, it should not be signed as a formality where those statements do not match the way the business actually runs.

South Dakota Hiring Parties Need Not Accept the Affidavit (SDCL 62-1-22)

No employer or general contractor is required to accept an affidavit of exempt status as a substitute for a certificate of coverage. A hiring business may still require the contractor to carry and evidence workers' compensation insurance, and requiring a certificate does not by itself undercut the classification.

South Dakota Trucking Owner-Operator Written Contract (SDCL 62-1-11(6))

To obtain a certificate of independent contractor status the owner-operator and the carrier must file written documentation that six conditions are substantially present, and the sixth is a contract-terms mandate: the owner-operator enters into a written contract which specifies the relationship to be that of an independent contractor and not that of an employee. Without the recital the certificate does not issue.

South Dakota Owner-Operator Certificate Binds the Parties (SDCL 62-1-10 and SDCL 62-1-12)

An owner-operator of a licensed truck, road tractor, or truck tractor is an independent contractor for workers' compensation purposes only if the owner-operator has applied for and received a certificate of independent contractor status from the Department of Labor and Regulation. Once issued, and absent changed circumstances, the certificate is binding upon the parties on the issue of independent contractor status, and it must be kept with the vehicle.

South Dakota Wage Law Uses a Different Definition (SDCL 60-1-1)

An employee is a person who is employed to render personal service to an employer otherwise than in the pursuit of an independent calling, and who in such service remains entirely under the control and direction of the employer. This Title 60 definition governs the minimum wage obligation in SDCL 60-11-3, and the burden-shifting language in SDCL 61-1-11 is limited to Title 61, so a wage claimant bears the ordinary burden of proving the elements.

South Dakota Workers' Compensation Employee Definition (SDCL 62-1-3)

An employee means any person, including a minor, in the services of another under any contract of employment, express or implied, excluding among others any person whose employment is not in the usual course of the trade, business, occupation, or profession of the employer. The two-factor control and independent-business analysis is applied against that definition rather than in place of it.

Frequently Asked Questions

South Dakota is one of the few states where a document can move the legal presumption rather than merely record the parties' intent. A notarized affidavit of exempt status under SDCL 62-1-19 creates a rebuttable presumption that the signer is not an employee for workers' compensation, and for trucking owner-operators a written contract reciting independent contractor status is a condition of a departmental certificate that then binds the parties.

Not the full version. SDCL 61-1-11 has only two prongs: freedom from control or direction over performance, both under the contract of service and in fact, and customary engagement in an independently established trade, occupation, profession, or business. There is no prong asking whether the service falls outside the usual course of the hiring party's business, which is the prong that makes a full ABC test hard to satisfy.

For unemployment purposes the hiring business does. Service for wages is employment subject to the title unless and until it is shown to the satisfaction of the Department of Labor and Regulation that both prongs are met. Both prongs must be satisfied, so failing either one produces an employee finding. In workers' compensation the Supreme Court has said the statutory scheme presumes employee status until independent contractor status is established.

It is a workers' compensation form for an independent contractor who is not an employer or general contractor and is not covered by a comp policy. Signing it creates a rebuttable presumption that the affiant is not an employee. SDCL 62-1-20 prescribes the document: it must be on a form prescribed by the director of the Division of Insurance, must be notarized, must contain eight enumerated acknowledgment statements, and must have an exempt status fact sheet attached that sets out the legal requirements for determining independent contractor status.

No. SDCL 62-1-22 says that no employer or general contractor is required to accept the affidavit of exempt status as a substitute for a certificate of coverage. A hiring business is free to insist on proof of a workers' compensation policy anyway, and many general contractors do. Note also that SDCL 62-1-21 makes knowingly providing false information on the affidavit a Class 2 misdemeanor.

A certificate of independent contractor status from the Department of Labor and Regulation. Under SDCL 62-1-10 to 62-1-12 the owner-operator and the carrier file written documentation that six conditions are substantially present, and SDCL 62-1-11(6) requires that the owner-operator enters into a written contract which specifies the relationship to be that of an independent contractor and not that of an employee. Once issued, and absent changed circumstances, the certificate is binding upon the parties on that issue and must be kept with the vehicle.

No. Wage claims are governed by SDCL 60-1-1, which defines an employee as a person employed to render personal service otherwise than in the pursuit of an independent calling and who remains entirely under the control and direction of the employer. The burden-shifting language in SDCL 61-1-11 is expressly limited to that title, so it does not apply to a Title 60 wage claim, where the claimant carries the ordinary burden of proving the elements.

South Dakota has no state overtime statute, so overtime is a Fair Labor Standards Act question decided under the federal economic realities analysis, which is a different inquiry from the two prongs in SDCL 61-1-11. Minimum wage is set by SDCL 60-11-3 and applies to employees as defined by SDCL 60-1-1.

No. The affidavit and the trucking certificate change the starting presumption, and a rebuttable presumption can still be rebutted by how the work is actually performed. The written agreement itself is evidence of the parties' intent, not a determination. Where the exposure is meaningful, attorney review is an option before the engagement starts rather than after a claim is filed.