Vermont Independent Contractor Agreement Template

Introduction

Key Things to Know

1. 1

   The wage payment law carries its own ABC test. 21 V.S.A. 341(1) defines an employee as an individual who has entered the employment of an employer where the employer is unable to show freedom from control or direction over performance both under the contract of service and in fact, service either outside all the usual course of business or outside all the places of business of the enterprise, and customary engagement in an independently established trade, occupation, profession, or business. The burden sits with the employer as a matter of definition, not of procedure.

2. 2

   Unemployment insurance uses the same three prongs. 21 V.S.A. 1301(6)(B) deems services performed for wages to be employment unless and until it is shown to the satisfaction of the Commissioner that all three are met, and the Vermont Supreme Court has held that failure to produce evidence on any of the factors results in the worker being classified as an employee.

3. 3

   The B prong is disjunctive here, which matters. The service qualifies if it is either outside the usual course of the business for which it is performed or performed outside all the places of business of the enterprise. Satisfying one is enough, which is materially easier on a hiring party than the versions of the B prong that require both.

4. 4

   Even a disjunctive B prong has teeth. In In re Bourbeau Custom Homes, Inc., 2017 VT 51, the Court restated the standard from earlier decisions: where a worker's service is the key component of the employer's business, the employer fails that part of the test. Bourbeau also holds that a duly formed limited liability company is not an individual under 21 V.S.A. 1301(6)(B), so the ABC test does not reach payments made to the entity.

5. 5

   Workers' compensation runs on different rules entirely. There is no ABC test. Courts apply the right-to-control test, 21 V.S.A. 601(3) sweeps in an owner or lessee who is virtually the proprietor or operator of the business carried on, and 21 V.S.A. 625 provides that an employer shall not be relieved in whole or in part from liability created by the chapter by any contract, rule, regulation, or device whatsoever. In Falconer v. Cameron the Court treated a lease agreement labeling the worker a contractor as exactly the kind of device that section forbids.

6. 6

   The sole proprietor exclusion is a drafting mandate. 21 V.S.A. 601(14)(F) excludes sole proprietors and partners only where six conditions are met, and the sixth requires a written agreement that explicitly states the individual is not considered to be an employee under the chapter, is working independently, has no employees, and has not contracted with other independent contractors. The agreement must also include information about the individual's right to purchase workers' compensation coverage and the individual's election not to purchase it. If the individual is later found to have employees, those employees may claim benefits against either or both parties to the agreement.

7. 7

   Real estate and corporate officers take different routes. 21 V.S.A. 601(14)(G)(iii) requires a written agreement explicitly stating that the licensed broker or salesperson is not considered to be an employee under the chapter and is not eligible for coverage under it, alongside licensure, commission-only pay, and non-employee tax treatment. By contrast 21 V.S.A. 601(14)(H) excludes corporate officers and limited liability company managers or members, up to four of them, only by filing an election with the Commissioner and receiving approval, which no contract recital can substitute for.

Vermont Requirements for Independent Contractor Agreement

• Vermont ABC Test in the Payment of Wages Subchapter (21 V.S.A. 341(1))

  An employee means an individual who has entered the employment of an employer, where the employer is unable to show that the individual has been and will continue to be free from control or direction over the performance of the services both under the contract of service and in fact, that the service is either outside all the usual course of business for which it is performed or outside all the places of business of the enterprise, and that the individual is customarily engaged in an independently established trade, occupation, profession, or business. The burden is placed on the employer by the definition itself.

• Vermont ABC Test for Unemployment Insurance (21 V.S.A. 1301(6)(B))

  Services performed by an individual for wages are deemed to be employment subject to the chapter unless and until it is shown to the satisfaction of the Commissioner that all three prongs are met. The employer bears the burden on every prong, and the Vermont Supreme Court has stated that failure to produce evidence concerning any of the factors results in the Department classifying the worker as an employee.

• Vermont B Prong Is Disjunctive (21 V.S.A. 1301(6)(B)(ii) and 341(1)(B))

  The service qualifies where it is either outside the usual course of the business for which it is performed or performed outside all the places of business of the enterprise. Because the two limbs are joined by or, satisfying one is sufficient. The limitation established in the case law is that where a worker's service is the key component of the hiring party's business, the employer fails that part of the test.

• Vermont Entity Status Under the Unemployment Definition (In re Bourbeau Custom Homes, Inc., 2017 VT 51)

  The Supreme Court held that a duly formed limited liability company is not an individual within the meaning of 21 V.S.A. 1301(6)(B), so an employer cannot be assessed unemployment tax on money paid to such an entity and the ABC test does not reach it. The holding is confined to the unemployment definition and does not settle wage payment or workers' compensation questions.

• Vermont Bar on Contracting Out of Workers' Compensation (21 V.S.A. 625 and 601(3))

  An employer shall not be relieved in whole or in part from liability created by the provisions of the chapter by any contract, rule, regulation, or device whatsoever. The statutory-employer definition at 21 V.S.A. 601(3) separately reaches the owner or lessee of premises or other person who is virtually the proprietor or operator of the business carried on but who, by reason of there being an independent contractor or for any other reason, is not the direct employer of the workers there employed.

• Vermont Sole Proprietor and Partner Written Agreement (21 V.S.A. 601(14)(F)(vi))

  The services must be performed under a written agreement or contract that explicitly states the individual is not considered to be an employee under the chapter, is working independently, has no employees, and has not contracted with other independent contractors. The agreement must also include information regarding the individual's right to purchase workers' compensation insurance coverage and the individual's election not to purchase that coverage. If the individual is found to have employees, those employees may file a claim for benefits against either or both parties to the agreement.

• Vermont Five Substantive Conditions Accompanying the Sole Proprietor Exclusion (21 V.S.A. 601(14)(F))

  The written agreement is only the sixth condition. The other five require that the work be distinct and separate from that of the contracting party, that the individual control the means and manner of the work, that the individual hold out as being in business for oneself, that the individual hold out to the general public and not work exclusively for one person, and that the individual not be treated as an employee for income or employment tax purposes.

• Vermont Waiver Also Affects Employer Status (21 V.S.A. 601(3))

  A person is not deemed to be an employer for the purposes of the chapter as the result of entering into a contract for services or labor with an individual who has knowingly and voluntarily waived coverage of the chapter under subdivision (14)(F). The waiver therefore reaches back into the definition of employer, which is why the recitals in the written agreement carry weight beyond the individual's own status.

• Vermont Real Estate Broker and Salesperson Recital (21 V.S.A. 601(14)(G)(iii))

  The services must be performed under a written agreement or contract that explicitly states the individual is not considered to be an employee under the chapter and is not eligible for coverage under it. The exclusion also requires licensure under 26 V.S.A. chapter 41, compensation on a commission-only basis, and treatment as a non-employee for tax purposes.

• Vermont Corporate Officers and LLC Members Elect by Filing, Not by Contract (21 V.S.A. 601(14)(H))

  Corporate officers and limited liability company managers or members, up to four individuals, are excluded only by filing an election with the Commissioner and receiving approval. No recital in an independent contractor agreement achieves this exclusion, which distinguishes it from the sole proprietor and real estate routes where the written agreement is itself a statutory element.