Texas Independent Contractor Agreement Template

Q: Does Texas require an independent contractor agreement to be in writing?

No. There is no general Texas statute requiring an independent contractor engagement to be in writing, and no required clause, disclosure, notice, or filing for an ordinary engagement. Labor Code Section 201.041 expressly contemplates an express or implied contract of hire, and the Payday Law definition at Section 61.001(5) reaches service performed under a contract of hire whether written or oral or express or implied. A writing is still the practical way to fix scope, payment, and ownership of the work product, and to evidence the relationship if it is questioned later, but it is not a legal precondition.

Q: Does Texas use an ABC test?

No. Texas has not adopted an ABC test, has no statutory presumption of contractor status, and has no economic realities statute. Unemployment insurance runs on the direction-and-control standard in Labor Code Section 201.041, where the default is employment and the hiring party carries the burden of showing freedom from control both under the contract and in fact. The Texas Payday Law uses a similar control inquiry at Section 61.001(5) and separately excludes an independent contractor from the definition of employee at Section 61.001(3)(B). Workers' compensation does not use a bare control test at all; it uses the statutory definitions in Sections 406.121(2) and 406.141(2).

Q: Is the Texas 20-factor test something specific to Texas?

Not really. The Texas Workforce Commission applies a comparative twenty-factor approach, published on its own classification page and in its Form C-8, and it is an adaptation of the old IRS twenty-factor test rather than a Texas innovation. Several other states publish a near-identical list. It is also a weighing exercise, not a scorecard: the commission states that depending on the type of business and the services performed not all twenty factors may apply, and that the weight assigned to a specific factor may vary with the facts.

Q: Do I have to carry workers' compensation for a contractor in Texas?

Texas is unusual here. Under Labor Code Section 406.002 coverage is elective for private employers except as otherwise provided by law, so the answer often is that no coverage is required of anyone. An employer that elects not to obtain coverage must notify the Division of Workers' Compensation in writing under Section 406.004, and non-subscribers also report work-related injuries involving more than one day of lost time, along with work-related illnesses and deaths. Because coverage is optional, the classification question and the coverage question come apart, and settling one does not settle the other.

Q: What actually happens if a Texas worker is misclassified?

Mostly derivative consequences rather than a headline fine. Back unemployment contributions come with interest of one and one-half percent per month under Labor Code Section 213.021, capped at 37.5 percent of the contribution due, plus failure-to-file penalties on a sliding scale under Section 213.022 and a 30 dollar per day continuing violation penalty under Section 213.024. Misclassification also raises unemployment tax rates. The heavier exposure is the non-subscriber position under Section 406.033: losing contributory negligence, assumption of the risk, and the fellow employee defense in an injury suit, with no ability to take a pre-injury waiver.

Q: Is there a 200 dollar per worker misclassification penalty in Texas?

Only for government contracting, and this is widely miscited. Labor Code Section 214.008 reaches a person who contracts with a governmental entity to provide a service as defined by Government Code Section 2155.001, and that person's subcontractors. Those parties must properly classify the individuals they directly retain for work on the contract, and a failure to do so carries a penalty of 200 dollars for each individual not properly classified, payable to the commission, with collection barred after the third anniversary of the violation. Secondary sources frequently quote the figure as a general Texas penalty for private employers. It is not.

Q: What is a Section 406.145 joint agreement?

It is a Texas-only instrument in small building and construction work. A hiring contractor and an independent subcontractor may make a joint agreement declaring that the subcontractor is an independent contractor as defined in Labor Code Section 406.141(2) and is not the employee of the hiring contractor. If both sign it and it is filed with the division, the subcontractor is an independent contractor and not an employee as a matter of law, and is not entitled to workers' compensation coverage through the hiring contractor unless a Section 406.144 agreement is made. The commissioner prescribes the form, a copy goes to the hiring contractor's carrier, and it applies until the first anniversary of its filing date. It is not self-executing on conduct either: Section 406.146(a)(2) prohibits exerting controls sufficient to make the person an employee under common-law tests.

Q: Does paying by the hour hurt contractor status in Texas?

It depends entirely on which law is being applied. In small building and construction work covered by Labor Code Chapter 406, Subchapter G, being paid by the job and not by the hour or some other time-measured basis is a hard element of the statutory definition at Section 406.141(2)(A), so an hourly rate defeats that definition regardless of how the work is really performed. Section 406.142 limits that subchapter to residential structures, commercial structures not exceeding three stories or 20,000 square feet, and appurtenances. Outside that scope, payment by the hour, week, or month is one of the twenty comparative factors and is not by itself decisive.

Q: Does Texas have a construction misclassification statute?

Not a general one. Texas has no construction-specific classification statute of the kind found in states with a construction ABC test. What it has is the workers' compensation regime in Labor Code Chapter 406, Subchapter G, which supplies its own definition of independent contractor and the joint agreement filing, and which Section 406.142 limits by structure type and size. Outside workers' compensation, construction work in Texas is analyzed under the same control standard as any other work.

Q: Are there Texas industries where the contract has to say something specific?

Three narrow ones, and in each the required language buys an unemployment tax exemption rather than deciding classification generally. For a landman, Labor Code Section 201.077(2) requires a written contract providing that the landman is to be treated as an independent contractor and not as an employee. For real estate brokers and salespersons, Section 201.072(1)(D) requires a written contract providing that the individual is not treated as an employee with respect to the service for federal tax purposes. For a private for-profit delivery service, Section 201.073(1)(H) requires a contract specifying the relationship to be that of an independent contractor and not an employee, and that is only one of nine conditions that all must be met.

Texas changes very little about the agreement itself. What it changes is workers' compensation, and that is where the Texas rules actually sit.

Find out where you stand in Texas

What do you need the contractor agreement for?

DocDraft provides document preparation, not legal advice.

Introduction

An Independent Contractor Agreement engages a freelancer, consultant, or tradesperson in Texas without creating an employment relationship. Texas is a common law control state, and the honest starting point is that Texas law asks almost nothing of the document. For an ordinary engagement there is no statute requiring a writing, no mandatory clause, no required disclosure, no filing, and no registration. The Texas Workforce Commission puts the same point from the other direction: a written or oral agreement between a business and a worker does not change an employee into an independent contractor. Texas Labor Code Section 201.041 treats service performed for wages or under an express or implied contract of hire as employment unless the hiring party shows, to the satisfaction of the commission, that the worker has been and will continue to be free from control or direction under the contract and in fact. That last phrase is the design: conduct is weighed alongside paper, so the contract cannot settle the question by itself. What is genuinely distinctive about Texas sits one regime over, in workers' compensation. Coverage is elective for private employers. A business carrying none is a non-subscriber and gives up the ordinary common-law defenses when an injured worker sues, and Labor Code Section 406.145 provides a dual signed, state filed joint agreement that resolves subcontractor status as a matter of law for one year in small construction. That filing, not the contract, is the Texas document that carries independent legal weight.

Key Things to Know

1
Texas Labor Code Section 201.041 starts from employment and puts the burden on the hiring party. Service performed for wages or under an express or implied contract of hire is employment unless it is shown to the satisfaction of the commission that the individual's performance of the service has been and will continue to be free from control or direction under the contract and in fact. The test is conjunctive twice over, on time and on source, so a contract that describes an independent relationship cannot satisfy it on its own.
2
The right to control is enough; it does not have to be used. The Texas Workforce Commission states that the law does not require a business to exercise direction and control, that direction and control would still exist even if it is not exercised, and that having the right to do so is sufficient. Businesses that believe they are safe because they leave a worker alone in practice are relying on a misreading of the standard.
3
The Texas Workforce Commission says directly that a written or oral agreement does not change an employee to an independent contractor, that a worker paid on a Form 1099 may not be an independent contractor, and that even when the business and the worker agree, they cannot classify an employee as a contractor. This is ordinary classification doctrine rather than a Texas rule, but Texas states it plainly and it answers the most common assumption about these agreements.
4
Workers' compensation coverage is elective for private employers under Labor Code Section 406.002, which makes Texas the national outlier. An employer that does not obtain coverage must notify the Division of Workers' Compensation in writing under Section 406.004. The practical effect is that classification and coverage come apart in Texas in a way they do not elsewhere, so answering the contractor question does not answer the coverage question.
5
The real Texas misclassification exposure is not a fine. A business that misclassifies and carries no coverage is a non-subscriber, and Labor Code Section 406.033(a) removes the defenses of contributory negligence, assumption of the risk, and negligence of a fellow employee in a personal injury or death suit by that worker. Section 406.033(e) makes any pre-injury waiver of that cause of action void and unenforceable, so the exposure cannot be contracted away in advance.
6
Labor Code Section 406.145 is the strongest Texas-only instrument available here. A hiring contractor and an independent subcontractor may sign a joint agreement declaring the subcontractor an independent contractor as defined in Section 406.141(2); if it is signed by both and filed with the division, the subcontractor is an independent contractor and not an employee as a matter of law. The commissioner prescribes the form, a copy goes to the hiring contractor's workers' compensation carrier, and it lasts only until the first anniversary of its filing date. It sits alongside the agreement as a separate filing rather than inside it, and it is still defeasible by conduct, because Section 406.146(a)(2) prohibits a hiring contractor from exerting controls sufficient to make the person an employee under common-law tests.
7
Workers' compensation supplies two closed-element definitions of independent contractor rather than weighed factors. Section 406.121(2) requires that the person act as employer of any employees, be free to determine the manner of the work, furnish or have employees furnish necessary tools, supplies, or materials, and possess the required skills. Section 406.141(2), for small building and construction work, requires payment by the job and not by the hour or another time-measured basis, freedom to hire and pay helpers, and freedom to work for other contractors. Under Section 406.141(2) an hourly rate or an exclusivity clause fails an element outright, and Section 406.142 confines that subchapter to residential structures and commercial structures of three stories or fewer or 20,000 square feet or less.

Key decisions before you file

Before you file a Independent Contractor Agreement in Texas, 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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Texas Independent Contractor Agreement

1. Parties. This Independent Contractor Agreement (the "Agreement") is entered into as of ________________, [YEAR] (the "Effective Date") by and between [COMPANY NAME], a [TYPE OF ENTITY] organized and existing under the laws of [STATE], with its principal place of business at [COMPANY ADDRESS] ("Company"), and [CONTRACTOR NAME], an individual residing at [CONTRACTOR ADDRESS] ("Contractor"). Company and Contractor may be referred to individually as a "Party" and collectively as the "Parties."

2. Services. Contractor shall perform the following services (the "Services"): [DESCRIPTION OF SERVICES]. Contractor shall deliver: [LIST OF DELIVERABLES].

Means and manner. Contractor shall determine the means, manner, methods, and sequence of performing the Services. Company may specify the results to be achieved and the deadlines for achieving them, but does not direct how the Services are performed.

Place of performance. Contractor shall perform the Services at ______ (Contractor's own premises, remotely, or another agreed location), and is not required to perform the Services at any premises of Company except where the nature of the Services requires it.

3. Independent Contractor Status. Contractor is an independent contractor and not an employee, agent, partner, or joint venturer of Company. Nothing in this Agreement creates an employment relationship.

Contractor representations. Contractor represents that Contractor: (a) is customarily engaged in an independently established trade, occupation, profession, or business of the same nature as the Services; (b) offers services to the general public and is free to accept work from other clients; (c) maintains Contractor's own place of business, tools, and equipment as appropriate to the Services; and (d) bears the opportunity for profit and the risk of loss on the Services.

Not exclusive. This Agreement is non-exclusive. Contractor may perform services for others during the Term, and Company does not require Contractor to work exclusively for Company.

Tools, supplies, and materials. Contractor furnishes, or has Contractor's own employees furnish, the tools, supplies, and materials necessary to perform the Services, except as the Parties expressly agree otherwise in writing.

Effect of this Section in Texas. This Section records how the Parties intend to treat the engagement. It does not decide the question. Texas Labor Code Section 201.041 treats service performed for wages or under an express or implied contract of hire as employment unless it is shown to the satisfaction of the Texas Workforce Commission that the individual's performance of the service has been and will continue to be free from control or direction under the contract and in fact. Because the statute reaches conduct as well as paper, the day to day operation of the engagement can override every representation above.

4. Fees and Payment. Company shall pay Contractor a fixed fee of $, an hourly rate of $ per hour, or the milestone amounts set out in Schedule A. Compensation is calculated and paid as follows: [RATE AND METHOD]. Company shall pay Contractor on or before ______ (a date, or the mechanism for determining it).

Texas constraint on the fee structure, small building and construction work only. Texas Labor Code Section 406.141(2)(A) makes payment "by the job and not by the hour or some other time-measured basis" an element of the statutory workers' compensation definition of independent contractor for work covered by Chapter 406, Subchapter G. Section 406.142 limits that subchapter to residential structures, commercial structures not exceeding three stories in height or 20,000 square feet in area, and appurtenances to them. Within that scope, an hourly rate defeats the statutory definition outright. Outside it, the fee structure is one consideration among many rather than a hard element.

5. Term and Termination. This Agreement begins on the Effective Date and continues until ______ or completion of the Services, unless terminated earlier under this Section. Either Party may terminate this Agreement on [NUMBER] days written notice to the other Party. Either Party may terminate immediately on written notice if the other Party materially breaches this Agreement and fails to cure within [NUMBER] days after written notice describing the breach.

Effect of termination. On termination, Company shall pay Contractor for all Services performed through the effective date of termination. Contractor shall deliver all work in progress for which Contractor has been paid. Sections 6, 7, 8, and 10 survive termination.

6. Ownership of Work Product. Upon full payment of all amounts due, Contractor assigns to Company all right, title, and interest in the deliverables created specifically for Company under this Agreement, including all copyright and other intellectual property rights in them.

Contractor materials. Contractor retains all right, title, and interest in any tools, methods, templates, know-how, and other materials that Contractor owned before the Effective Date or develops independently of this Agreement. To the extent any such materials are incorporated into a deliverable, Contractor grants Company a non-exclusive, perpetual, royalty-free license to use them as part of that deliverable.

7. Confidentiality. Contractor may receive information of Company that is marked confidential or that a reasonable person would understand to be confidential ("Confidential Information"). Contractor shall not use Confidential Information except to perform this Agreement and shall not disclose it to any third party without Company's prior written consent. Confidential Information does not include information that is or becomes public through no fault of Contractor, was known to Contractor without restriction before disclosure, is independently developed without use of Company's Confidential Information, or is rightfully received from a third party without restriction.

8. Taxes, Benefits, and Insurance. Contractor is responsible for all federal, state, and local taxes on amounts paid under this Agreement. Company will not withhold income tax, Social Security, or Medicare contributions, and will report payments on IRS Form 1099-NEC where required. The form used to report payment does not determine classification.

No benefits. Contractor is not eligible for and waives any claim to employee benefits provided by Company, including health insurance, retirement contributions, and paid leave, except where such coverage is required by law.

Texas workers' compensation status. Select one and state it accurately, because Texas coverage is elective under Labor Code Section 406.002. [OPTION A: Company subscribes to workers' compensation insurance. Contractor and Contractor's employees are not covered by that policy, and Contractor shall obtain and maintain Contractor's own coverage or accept the consequences of not carrying it.] [OPTION B: Company does not carry workers' compensation insurance coverage and is a non-subscriber. Company has notified the Division of Workers' Compensation of that election as required by Labor Code Section 406.004.]

No pre-injury waiver. Nothing in this Agreement waives, and the Parties do not intend it to waive, any cause of action described in Texas Labor Code Section 406.033(a). Section 406.033(e) makes any agreement to waive such a cause of action before injury or death void and unenforceable, so a pre-injury waiver must not be drafted into this Agreement.

9. Indemnification. Each Party shall indemnify the other against third-party claims arising from the indemnifying Party's breach of this Agreement, negligence, or willful misconduct.

10. General. Governing law. This Agreement is governed by the laws of the State of Texas, without regard to its conflict of laws rules.

Entire agreement. This Agreement, together with its Schedules, is the entire agreement between the Parties on its subject matter and supersedes all prior discussions.

Amendment. This Agreement may be amended only in a writing signed by both Parties.

Assignment. Neither Party may assign this Agreement without the other Party's prior written consent.

Severability. If any provision is held unenforceable, the remainder of this Agreement remains in effect.

Counterparts. This Agreement may be executed in counterparts, including by electronic signature.

Signatures.

Company: ______________________________ Date: ____________

Print name and title: ______________________________

Contractor: ______________________________ Date: ____________

Print name: ______________________________

Companion filing, not a clause in this Agreement. For small building and construction work within the scope of Labor Code Section 406.142, a hiring contractor and an independent subcontractor may sign a joint agreement under Labor Code Section 406.145 declaring that the subcontractor is an independent contractor as defined in Section 406.141(2) and is not the employee of the hiring contractor. It takes effect only if it is signed by both parties and filed with the Division of Workers' Compensation, the commissioner prescribes the form, a copy goes to the hiring contractor's workers' compensation carrier, and it applies until the first anniversary of its filing date. It is a separate instrument executed alongside this Agreement, not a paragraph inside it.

Note on scope. For an ordinary Texas engagement outside a regulated industry, Texas law imposes no required clause, no required disclosure, no notice, no filing, and no registration on this document, so the Texas version differs from a well-drafted national form only in the annotated blocks above. Narrow exceptions apply to landmen (Labor Code Section 201.077(2)), real estate licensees (Section 201.072(1)(D)), and private for-profit delivery services (Section 201.073(1)(H)), each of which requires specific language in a written contract as a condition of an unemployment tax exemption. Even a filed Section 406.145 joint agreement is defeasible: Section 406.146(a)(2) prohibits a hiring contractor from exerting controls sufficient to make the person an employee under common-law tests. This is general information, not legal advice, and attorney review is available.

Texas Requirements for Independent Contractor Agreement

No Written Contract Mandate and No Required Clauses (Labor Code Section 201.041)
Texas imposes no general requirement that an independent contractor engagement be in writing and no mandatory contract term, disclosure, notice, signature formality, language mandate, or registration for an ordinary engagement. Section 201.041 reaches service performed under an express or implied contract of hire, and the Payday Law definition at Section 61.001(5) reaches contracts of hire whether written or oral. The Texas Workforce Commission states that a written or oral agreement does not change an employee to an independent contractor, so the document should be drafted for commercial clarity and evidence rather than as a classification device.
Employment Is the Default and the Burden Sits on the Hiring Party (Labor Code Section 201.041)
Under Section 201.041, employment means a service performed by an individual for wages or under an express or implied contract of hire, unless it is shown to the satisfaction of the commission that the individual's performance of the service has been and will continue to be free from control or direction under the contract and in fact. The showing is conjunctive on time and on source. The Texas Workforce Commission adds that the right to direct or control is sufficient and need not be exercised, and applies a comparative twenty-factor approach adapted from the old IRS twenty-factor test.
Workers' Compensation Coverage Is Elective and Non-Coverage Must Be Reported (Labor Code Sections 406.002, 406.004)
Except for public employers and as otherwise provided by law, a Texas employer may elect whether to obtain workers' compensation insurance coverage. An employer that does not obtain coverage must notify the Division of Workers' Compensation in writing, in the time and manner prescribed by commissioner rule, that it elects not to obtain coverage. The Division also expects non-subscribers to report work-related injuries resulting in more than one day of lost time, along with work-related illnesses and deaths. Confirm current subscriber status before describing coverage in any agreement.
Non-Subscribers Lose the Common-Law Defenses and Cannot Take a Pre-Injury Waiver (Labor Code Section 406.033)
In a personal injury or death action by an employee not covered by workers' compensation insurance obtained as authorized by Section 406.003, it is not a defense that the employee was contributorily negligent, assumed the risk, or was injured by the negligence of a fellow employee. Any agreement by an employee to waive that cause of action before injury or death is void and unenforceable. Do not draft a pre-injury waiver into a Texas agreement. This defense forfeiture, rather than any state fine, is the practical consequence of getting classification wrong while carrying no coverage.
Joint Agreement Filed With the Division, Small Construction Only (Labor Code Sections 406.145, 406.142, 406.146)
A hiring contractor and an independent subcontractor may make a joint agreement declaring that the subcontractor is an independent contractor as defined in Section 406.141(2) and is not the employee of the hiring contractor. If signed by both and filed with the division, the subcontractor is an independent contractor and not an employee as a matter of law, and is not entitled to coverage through the hiring contractor unless an agreement is entered into under Section 406.144. The commissioner prescribes the form, a copy goes to the hiring contractor's carrier, and the agreement applies until the first anniversary of its filing date. Section 406.142 limits the subchapter to residential structures, commercial structures not exceeding three stories or 20,000 square feet, and appurtenances. Section 406.146(a)(1) prohibits wrongfully inducing an employee into such an agreement and Section 406.146(a)(2) prohibits exerting controls sufficient to make the person an employee under common-law tests.
Two Closed-Element Statutory Definitions for Workers' Compensation (Labor Code Sections 406.121(2), 406.141(2), 406.122)
Section 406.121(2) defines independent contractor for general contractor and motor carrier relationships as a person who contracts to perform work for the benefit of another and who ordinarily acts as the employer of any employees, is free to determine the manner in which the work is performed including hours and method of payment of any employees, is required to furnish or have employees furnish necessary tools, supplies, or materials, and possesses the required skills. Section 406.141(2), for small building and construction work, requires payment by the job and not by the hour or other time-measured basis, freedom to hire helpers and set their pay, and freedom to work for other contractors or to send helpers to them. These are closed element lists rather than weighed factors, so an hourly rate or an exclusivity clause fails Section 406.141(2) outright. Section 406.122(b) separately requires a written agreement with the general contractor under which the subcontractor assumes the responsibilities of an employer.
Required Contract Language in Three Industries Only (Labor Code Sections 201.077(2), 201.072(1)(D), 201.073(1)(H))
Landman contracts must state that the landman is to be treated as an independent contractor and not as an employee with respect to the service provided under the contract. Real estate broker, salesperson, and real estate instructor contracts must provide that the individual is not treated as an employee with respect to the service for federal tax purposes. Private for-profit delivery service contracts must specify the relationship to be that of an independent contractor and not an employee, which is one of nine conjunctive conditions in Section 201.073(1). In each case the language is a condition of an unemployment tax exemption for that service, not a determination of status for other purposes.
The 200 Dollar Penalty Applies Only to Government Contractors (Labor Code Section 214.008)
Section 214.008 requires a person who contracts with a governmental entity to provide a service as defined by Government Code Section 2155.001, and that person's subcontractors, to properly classify individuals they directly retain for work on the contract. A failure carries a penalty of 200 dollars for each individual not properly classified, payable to the commission, and the commission may not collect after the third anniversary of the violation. There is no general Texas misclassification fine for private employers. Exposure otherwise runs through unemployment contributions and interest under Section 213.021, failure-to-file penalties under Section 213.022, and the continuing violation penalty under Section 213.024.

Frequently Asked Questions

Does Texas require an independent contractor agreement to be in writing?

Does Texas use an ABC test?

Is the Texas 20-factor test something specific to Texas?

Do I have to carry workers' compensation for a contractor in Texas?

What actually happens if a Texas worker is misclassified?

Is there a 200 dollar per worker misclassification penalty in Texas?

What is a Section 406.145 joint agreement?

Does paying by the hour hurt contractor status in Texas?

Does Texas have a construction misclassification statute?

Are there Texas industries where the contract has to say something specific?

Find out where you stand in Texas

Introduction

Key Things to Know

Key decisions before you file

Customize your Independent Contractor Agreement Template with DocDraft

Texas Independent Contractor Agreement

Texas Requirements for Independent Contractor Agreement

No Written Contract Mandate and No Required Clauses (Labor Code Section 201.041)

Employment Is the Default and the Burden Sits on the Hiring Party (Labor Code Section 201.041)

Workers' Compensation Coverage Is Elective and Non-Coverage Must Be Reported (Labor Code Sections 406.002, 406.004)

Non-Subscribers Lose the Common-Law Defenses and Cannot Take a Pre-Injury Waiver (Labor Code Section 406.033)

Joint Agreement Filed With the Division, Small Construction Only (Labor Code Sections 406.145, 406.142, 406.146)

Two Closed-Element Statutory Definitions for Workers' Compensation (Labor Code Sections 406.121(2), 406.141(2), 406.122)

Required Contract Language in Three Industries Only (Labor Code Sections 201.077(2), 201.072(1)(D), 201.073(1)(H))

The 200 Dollar Penalty Applies Only to Government Contractors (Labor Code Section 214.008)

Frequently Asked Questions