Tennessee Independent Contractor Agreement Template
Tennessee runs three statutory classification tests at once, and the one people expect to be the outlier is not the one that is.
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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. Tennessee decides classification by legal test rather than by the title on the document, and it is one of the clearest examples of a state where the test changes depending on which law is being applied. Since January 1, 2020, the twenty factors of IRS Revenue Ruling 87-41 have governed wage and hour law, occupational safety, unemployment insurance, and drug-free workplace programs, all put there in a single stroke by 2019 Public Chapter 337. The same act repealed the ABC test that had been the unemployment standard until then, which is the opposite of the direction most states have moved. It also left workers' compensation alone, so that act still runs on its own seven-factor statutory list at Tenn. Code Ann. 50-6-102(11)(D)(i). A third regime sits beside both: Tenn. Code Ann. 50-8-102 gives online marketplace platforms an independent contractor result for all purposes under state and local laws, but only where ten specified conditions are set forth in a written agreement. That last one is the only Tennessee test where the drafting itself is an element.
Key Things to Know
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Tennessee changed direction in 2020. Public Chapter 337, effective January 1, 2020, deleted the ABC test from the Employment Security Law and substituted the twenty factors of IRS Revenue Ruling 87-41, 1987-1 C.B. 296, reproduced in the statute at Tenn. Code Ann. 50-7-207(b)(2)(B). Most states that changed their unemployment test in recent years tightened it; Tennessee loosened it. The act applies only to actions occurring on or after that date, so pre-2020 conduct is still judged by the repealed ABC test.
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The same twenty factors were written into three other chapters at the same time: wage and hour law at Tenn. Code Ann. 50-2-111, the Occupational Safety and Health Act of 1972 at 50-3-103(7), and drug-free workplace programs at 50-9-103(9). One factor list now answers four different questions.
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Workers' compensation was deliberately left out, and this is where most summaries go wrong. Tenn. Code Ann. 50-6-102(11)(D)(i) keeps its own seven factors: the right to control the conduct of the work, the right of termination, the method of payment, the freedom to select and hire helpers, the furnishing of tools and equipment, self-scheduling of working hours, and the freedom to offer services to other entities.
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The burden in a workers' compensation dispute has two steps. The Workers' Compensation Appeals Board framed it in Hernandez v. SMS, Inc. as the claimant first establishing the existence of a work relationship, after which the employer bears the burden of showing the worker was an independent contractor. The Bureau of Workers' Compensation adds that each of the seven factors is considered with significant weight given to who controls the conduct of the work, and that issuing a Form 1099 instead of a Form W-2 does not mean a worker is properly classified.
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The unemployment provision no longer shifts the burden. The pre-2020 text said service was included employment unless and until it was shown to the satisfaction of the administrator that three prongs were met. Public Chapter 337 struck that language, leaving a neutral definitional test based on consideration of the twenty factors, and the state labor department notes that not all factors are weighted equally or may even be relevant.
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The wage and hour provision is coverage-limiting rather than burden-shifting. Tenn. Code Ann. 50-2-111 provides that the chapter only applies to an individual if the individual performs services for an employer for wages and the services qualify as an employer-employee relationship under the twenty factors, so a wage claimant has to bring themselves inside the chapter. Tennessee has no state minimum wage statute and no state overtime statute, so the Fair Labor Standards Act runs in parallel on its own economic realities analysis.
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Online marketplace platforms have a written-agreement safe harbor with unusually broad reach. Tenn. Code Ann. 50-8-102(a) makes a marketplace contractor an independent contractor and not an employee of the platform for all purposes under state and local laws, rules, ordinances, and resolutions, but only if ten conditions are set forth in a written agreement between the platform and the contractor. Subsection (b) excludes services described in 26 U.S.C. 3306(c)(7) or (c)(8).
Key decisions before you file
Before you file a Independent Contractor Agreement in Tennessee, 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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Tennessee Requirements for Independent Contractor Agreement
Employment covers an individual who performs services for an employer for wages where the services qualify as an employer-employee relationship based upon consideration of the twenty factors described in the twenty-factor test of IRS Revenue Ruling 87-41, 1987-1 C.B. 296. The provision was substituted by 2019 Public Chapter 337, section 3, effective January 1, 2020, and it contains no burden-shifting language.
Before January 1, 2020 the Employment Security Law used an ABC test with the burden on the employer, framed as unless and until it is shown to the satisfaction of the administrator. The 2019 act struck that language. Section 6 provides that the act applies only to actions occurring on or after the effective date, so conduct before 2020 is still assessed under the repealed ABC standard.
The chapter only applies to an individual if the individual performs services for an employer for wages and the services qualify as an employer-employee relationship based upon consideration of the twenty factors of IRS Revenue Ruling 87-41. The provision is coverage-limiting rather than burden-shifting, so a claimant must affirmatively bring themselves within the chapter. Tennessee has no state minimum wage or overtime statute, leaving those to the Fair Labor Standards Act.
Workers' compensation was not amended by the 2019 act and keeps its own statutory list: the right to control the conduct of the work, the right of termination, the method of payment, the freedom to select and hire helpers, the furnishing of tools and equipment, self-scheduling of working hours, and the freedom to offer services to other entities. The Bureau of Workers' Compensation states that each factor is considered with significant weight given to who controls the conduct of the work.
The Appeals Board held that once the claimant established the existence of a work relationship with the company, the employer did not meet its burden of showing the claimant was an independent contractor and not an employee. The same opinion notes in a footnote that unemployment compensation uses the twenty-factor list and online marketplace platforms use a ten-factor list, confirming that the three regimes coexist.
A marketplace contractor is an independent contractor and not an employee of the marketplace platform for all purposes under state and local laws, rules, ordinances, and resolutions if ten conditions are set forth in a written agreement between the platform and the contractor. The first condition is itself a required recital that the parties agree in writing the contractor is an independent contractor with respect to the platform. Without the written agreement the safe harbor is unavailable.
The remaining nine conditions constrain how the platform operates: no unilaterally prescribed hours of availability, no prohibition on using other platforms, discretion for the contractor to enlist and pay an assistant, no restriction on other occupations or businesses, no required supplies or equipment, no control over means and methods beyond quality standards and requirements, termination by either side with or without cause, contractor responsibility for taxes on income from services to third parties, and payment based all or substantially all on performance of services to third parties engaged through the platform.
The marketplace contractor provision does not apply to services described in 26 U.S.C. 3306(c)(7) or (c)(8), which cover service performed in the employ of a state or its political subdivisions and instrumentalities, and service performed in the employ of certain tax-exempt religious, charitable, and educational organizations. Platforms engaging contractors in those settings cannot rely on the safe harbor.
A construction services provider listed on the workers' compensation exemption registry established under Part 9 of the chapter is outside the statutory definition of employee where the statutory conditions about coverage and project type are met. Separately, a subcontractor may elect coverage under the general contractor's policy upon written agreement of the general contractor and by filing written notice of the election on a form prescribed by the Commissioner of Labor and Workforce Development, and the election does not affect the subcontractor's independent contractor status for any other purpose.
The same 2019 act rewrote Tenn. Code Ann. 50-7-207(e) to deem leased-operator and owner-operator services performed for an interstate common carrier an excluded service for unemployment purposes. Motor carrier engagements should be checked against that exclusion in addition to the twenty-factor analysis.
Frequently Asked Questions
Tennessee applies three statutory classification tests side by side. Twenty IRS factors govern wage and hour law, occupational safety, unemployment insurance, and drug-free workplace programs. Seven statutory factors govern workers' compensation. Ten written contract conditions govern online marketplace platforms. Only the third makes the drafting itself an element of the outcome.
No. The ABC test was the unemployment standard until January 1, 2020, when 2019 Public Chapter 337 deleted it and substituted the twenty factors of IRS Revenue Ruling 87-41. The act applies only to actions occurring on or after that date, so conduct before 2020 is still measured against the repealed ABC language, which required the hiring party to show freedom from control, service outside the usual course or outside all places of business, and customary engagement in an independently established trade.
Four chapters, all amended by the same 2019 act. Wage and hour law at Tenn. Code Ann. 50-2-111, the Occupational Safety and Health Act of 1972 at 50-3-103(7), the Employment Security Law at 50-7-207(b)(2)(B), and drug-free workplace programs at 50-9-103(9). The factors include instructions, training, integration, services rendered personally, hiring and paying assistants, continuing relationship, set hours, full time required, work on the hiring party's premises, order or sequence set, reports, method of payment, expenses, tools, investment, profit or loss, working for more than one firm, availability to the general public, right to discharge, and right to terminate.
No, and this is the point most summaries get backwards. The 2019 act did not touch the Workers' Compensation Law. Tenn. Code Ann. 50-6-102(11)(D)(i) keeps a separate seven-factor list: the right to control the conduct of the work, the right of termination, the method of payment, the freedom to select and hire helpers, the furnishing of tools and equipment, self-scheduling of working hours, and the freedom to offer services to other entities.
It moves in two steps. The claimant must first establish the existence of a work relationship. Once that is done, the employer bears the burden of showing the worker was an independent contractor rather than an employee, as the Workers' Compensation Appeals Board put it in Hernandez v. SMS, Inc. The Bureau of Workers' Compensation weighs each of the seven factors with significant weight given to who controls the conduct of the work.
No. The Bureau of Workers' Compensation states directly that even if a worker is provided an IRS Form 1099 instead of a W-2, that does not mean they are properly classified for workers' compensation purposes. Tax paperwork is one piece of evidence within a multi-factor weighing, and the day-to-day conduct of the engagement carries far more weight. Attorney review is an option before a significant engagement begins.
Tenn. Code Ann. 50-8-102(a) provides that a marketplace contractor is an independent contractor and not an employee of the marketplace platform for all purposes under state and local laws, rules, ordinances, and resolutions if ten conditions are set forth in a written agreement between the platform and the contractor. Those conditions cover written agreement on status, no unilaterally prescribed availability hours, freedom to use other platforms, the right to enlist an assistant paid by the contractor, freedom to hold other occupations, no required supplies or equipment, no control over means and methods beyond quality standards, termination with or without cause by either side, contractor responsibility for taxes, and performance-based payment. Subsection (b) excludes services described in 26 U.S.C. 3306(c)(7) or (c)(8).
Tennessee has no state minimum wage statute and no state overtime statute, so those obligations come from the Fair Labor Standards Act and are decided under the federal economic realities analysis rather than the twenty factors. The state wage and hour chapter is coverage-limited by Tenn. Code Ann. 50-2-111, which says the chapter only applies where the services qualify as an employer-employee relationship under the twenty-factor test.
Coverage thresholds differ by sector: non-construction employers generally need five or more employees before the Workers' Compensation Law applies, construction services providers need coverage with one employee, and coal mining employers must cover all employees. A construction services provider listed on the exemption registry established under Part 9 of the chapter is outside the definition of employee in the circumstances the statute describes, and Tenn. Code Ann. 50-6-902(c) separately lets a subcontractor elect onto a general contractor's policy by written agreement and a filed notice without affecting independent contractor status for other purposes.