Independent contractor clause
An independent contractor clause states that a worker or business is not the other party’s employee, partner or agent and controls how it does the work.
What it means
An independent contractor clause says the relationship is between two separate businesses, not an employer and an employee. It usually says the contractor controls how the work is done, supplies their own tools, pays their own taxes, gets no employee benefits, and cannot sign contracts on the client’s behalf.
The label alone does not settle the question. Tax authorities, labor agencies and courts look at how the relationship actually works, such as who controls the schedule and methods, whether the worker has other clients, and how central the work is to the client’s business. The tests differ by agency and state, and some states use a strict test that presumes a worker is an employee unless several conditions are met.
For a client, misclassification can lead to back taxes, penalties and wage claims. For a freelancer, being treated as an employee could bring minimum wage, overtime and benefits protections. A contract that calls someone a contractor but sets their hours, requires exclusive work and supervises daily tasks sends mixed signals, and the actual facts usually win.
What to watch for
- Check whether the contract’s day-to-day controls, such as fixed hours, required tools or close supervision, match the independent contractor label.
- Look at who is responsible for taxes, insurance, licenses and expenses.
- See whether the contract bars you from working for other clients, which can undercut contractor status.
- Check whether the contract says you cannot sign agreements or make commitments on the client’s behalf.
- Look for an indemnity requiring the contractor to cover the client’s costs if the relationship is later reclassified.
Example clause
Contractor is an independent contractor and not an employee, partner or agent of Client. Contractor controls the manner and means of performing the Services, is responsible for all taxes on its fees, and is not eligible for any Client employee benefits.
You run your own business, decide how to do the work and handle your own taxes, and you get no employee benefits from the client.