Texas Independent Contractor Agreement
Draft a Texas-compliant independent contractor agreement built around the Texas Workforce Commission common-law control test and Chapter 406 workers' comp election, so your 1099 relationship survives a misclassification audit.
AI-generated draft for review. Not legal advice. Starting at $29.
Legal Requirements in Texas
Genuine contractor status under the Texas Unemployment Compensation Act common-law / "direction or control" test (Tex. Lab. Code Ch. 201), reinforced by the TWC 20-factor guide adapted from the IRS test.
No statutory written-contract mandate for contractors, but a written scope-of-work and "right to control results, not means" clause is the practical proof a Texas auditor looks for.
Address workers' compensation: a hiring party is not required to cover a true contractor, but coverage is elective in Texas (Tex. Lab. Code Ch. 406) and the contractor should carry or waive it expressly.
Confidentiality and trade-secret protection under the Texas Uniform Trade Secrets Act (Tex. Civ. Prac. & Rem. Code Ch. 134A) and the federal Defend Trade Secrets Act, 18 U.S.C. §§ 1836-1839.
IP assignment should be express; without a "work made for hire" plus assignment clause, a Texas contractor may retain copyright under the Copyright Act, 17 U.S.C. § 201.
Confirm contractor handles own federal income and self-employment tax (no Texas state income tax to withhold) and issue Form 1099-NEC for payments of $600 or more.
Key Statutes & Regulations
- Texas Unemployment Compensation Act, Tex. Lab. Code Ch. 201 (common-law control test) (2026)
- Texas Workers' Compensation Act, Tex. Lab. Code Ch. 406 (elective coverage) (2026)
- Texas Uniform Trade Secrets Act, Tex. Civ. Prac. & Rem. Code Ch. 134A (2026)
- Defend Trade Secrets Act, 18 U.S.C. §§ 1836-1839 (2026)
- Copyright Act (work made for hire / assignment), 17 U.S.C. § 201 (2026)
Common Pitfalls
- •Treating a long-term, full-time, single-client contractor as a 1099 worker when continuous regular-hours engagement points toward employee status under the control test.
- •Omitting an express IP assignment and assuming "work made for hire" covers everything, leaving copyright with the contractor under 17 U.S.C. § 201.
- •Failing to issue Form 1099-NEC, which both undercuts the contractor narrative and triggers IRS penalties.
- •Assuming no workers' comp issue exists because Texas is elective, then facing liability when an uninsured contractor is injured on site.
Local Terminology
- Right to control
- The core Texas test: if the hiring party controls how, when, and where work is done (not just the result), the worker is an employee.
- Elective workers' compensation
- Texas is the only state where private employers may legally opt out of carrying workers' comp; contractor coverage must be addressed expressly.
- TWC 20-factor test
- The Texas Workforce Commission guide, adapted from the old IRS 20-factor test, used to classify a worker as employee or contractor.
How Texas Differs
Texas has no state income tax, so there is no state wage withholding for either party; obligations are federal-only.
Texas uses a control-focused common-law / 20-factor test, not California's strict ABC test, so a properly structured contractor relationship is easier to maintain.
Workers' compensation is elective in Texas, unlike most states, so a contractor's comp status must be handled by contract rather than assumed.
TWC can retroactively reclassify and assess unpaid unemployment tax going back several years, so documentation of independence matters even without an upfront contract requirement.
Frequently Asked Questions
Does Texas require a written independent contractor agreement?
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No. Texas imposes no statutory written-contract mandate for independent contractors. However, the Texas Workforce Commission applies a common-law control test, and a written agreement defining scope, deliverables, and the contractor's right to control the means of work is the strongest evidence that the relationship is genuinely 1099, not employment.
How does Texas decide if someone is a contractor or an employee?
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Texas uses a common-law "direction or control" test under the Unemployment Compensation Act, supported by the TWC 20-factor guide. The key question is whether the hiring party controls how the work is done, not just the result. Controlling the details, schedule, and methods points to employee status regardless of the contract label.
Do I withhold any state taxes from a Texas contractor?
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No. Texas has no state income tax, so there is no state wage or income withholding for contractors or employees. A true independent contractor pays their own federal income and self-employment taxes, and the hiring party issues Form 1099-NEC for total payments of $600 or more in a year.
Can a Texas contractor sign a non-compete?
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Yes. Texas enforces non-competes under Tex. Bus. & Com. Code § 15.50 if they are ancillary to an otherwise enforceable agreement, supported by consideration, and reasonable in time, geography, and scope. Unlike California, Texas does not void non-competes and imposes no salary threshold, but overbroad restraints may be reformed by a court.
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