What are the rules for independent contractors in Texas?

Texas applies the common law right-to-control test to determine worker classification. The primary question is whether the hiring entity has the right to control not only the outcome of the work but also the manner and means by which the work is performed. Secondary factors include: whether the worker supplies their own tools and equipment; whether the worker works for multiple clients simultaneously; whether the relationship is project-based or indefinite; whether the worker sets their own schedule; and whether the worker bears the risk of profit or loss. Texas is generally more business-friendly on worker classification than states like California — the right-to-control test is less prescriptive than California's ABC test, and there is no equivalent to AB5.

How does Texas classify independent contractors?

Texas uses the right-to-control test derived from common law and applied by the Texas Workforce Commission (TWC). The TWC looks primarily at who controls the method and details of how the work is done — not just who controls the outcome. Key factors weighing toward contractor status include: the worker sets their own hours and works where they choose; the worker provides their own tools; the worker works for multiple businesses; the engagement is project-based with a defined scope; and the worker is paid per project or invoice rather than a salary. A written IC agreement documenting these factors is the first line of evidence in any TWC audit or misclassification dispute.

Are non-compete clauses enforceable in Texas?

Yes, subject to specific requirements. Under Texas Business and Commerce Code §15.50, a non-compete agreement is enforceable if: (1) it is ancillary to an otherwise enforceable agreement (such as an employment contract or an IC agreement that includes confidentiality or IP provisions); (2) it contains reasonable limitations as to time, geographic area and scope of activity. Courts apply a three-part test: the time period must be reasonable (typically up to 2 years); the geographic area must be reasonable (tied to where the company does business); and the scope of restricted activity must be no broader than necessary to protect the legitimate business interests being protected (customer relationships, trade secrets). Unlike California, Texas courts will reform an overbroad non-compete rather than void it entirely.

What should be in a Texas independent contractor agreement?

A Texas IC agreement should include: (1) parties — company and contractor details; (2) scope of services — a specific statement of work; (3) compensation and invoicing; (4) right-to-control documentation — the contractor controls their methods, uses own tools, may work for other clients; (5) term and termination; (6) IP assignment — who owns deliverables; (7) confidentiality; (8) no employment relationship / no benefits / no withholding; (9) non-solicitation (common in Texas, where non-competes are permitted); and (10) governing law — State of Texas. Texas IC agreements are typically more comprehensive than those in non-compete-friendly states because employers can include enforceable restrictive covenants.

Does Texas use the ABC test for contractor classification?

No. Texas uses the traditional common law right-to-control test — not the ABC test used in California, Massachusetts and New Jersey. The right-to-control test focuses primarily on behavioral control: does the hiring entity have the right to control how the work is done, not just the result? Texas has not adopted an AB5-style presumption of employment. This makes Texas more business-friendly for contractor relationships than California, but it does not mean contractor misclassification carries no risk — the Texas Workforce Commission actively audits employer payroll records and can assess back unemployment taxes, interest and penalties for misclassification.

Can a Texas independent contractor collect unemployment benefits?

Generally, no. Independent contractors are not covered by Texas unemployment insurance because the company does not pay unemployment taxes on their behalf. However, if the Texas Workforce Commission determines that a worker who filed for unemployment benefits was actually an employee rather than a contractor, the TWC can reclassify the relationship and assess the employer for back unemployment taxes, interest and penalties. This is one of the most common ways Texas contractor misclassification is discovered — when a worker files for unemployment after a contract ends. A well-documented contractor agreement with evidence of IC status reduces this risk.

Updated June 2026

Free Texas Independent
Contractor Agreement

Drafted for Texas contractor engagements under Texas common law. Includes right-to-control classification evidence, scope of work, IP assignment and confidentiality. Governed by Texas law. Non-solicitation clause included — enforceable in Texas when drafted correctly.

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Reviewed June 2026
Texas right-to-control language

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Fill in your project details — the preview updates live. Download a filled DOCX or PDF with Texas-specific classification language.

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1 — Company (Hiring Entity)

Effective Date

Company Name

Company Address

Signatory Title (optional)

2 — Contractor

Contractor Full Name

Business Name (optional)

Contractor Address

Contractor Title (optional)

3 — Services

Project / Services

Deliverables

Deadline

4 — Payment

Fee Type

Currency

Amount

Payment Schedule

Governing Law

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Independent Contractor Agreement

State of Texas · Date: enter date above

1. Parties

Company: Company name,

Contractor: Contractor name, ,

2. Services

Project: project name

Deliverables: deliverables

Deadline: deadline

3. Texas Classification

Right-to-control documentation — contractor controls methods, uses own tools, multiple clients

4. Compensation

Fee: USD ($) amount — Fixed project fee

Schedule: payment schedule

5–9. Standard Clauses

Term · IP assignment · Confidentiality · Non-solicitation · No benefits / no withholding

10. Governing Law

Governed by: State of Texas, USA.

Company

Signature

Print name: _______________

Title: _______________

Date: _________________

Contractor

Signature

Print name: _______________

Title: _______________

Date: _________________

Template preview

Texas Independent Contractor Agreement Free to download

Parties

1. Agreement Parties

This Independent Contractor Agreement ("Agreement") is entered into as of [Date] between [Company Name], [Address] ("Company"), and [Contractor Name], [Business Name], [Address] ("Contractor"). This Agreement is governed by the laws of the State of Texas.

Services

2. Services and Deliverables

The Contractor agrees to provide the following services: [Project Description]. Deliverables: [Specific deliverables]. Deadline: [Date]. Services not listed are outside scope. The Contractor may use their own tools, set their own schedule and work remotely unless otherwise agreed.

Texas Classification

3. Independent Contractor Status — Texas Right-to-Control Test

Under Texas common law and the Texas Workforce Commission guidelines, the parties represent and acknowledge the following facts supporting independent contractor status:

Control of methods: The Company has the right to specify the desired outcome and delivery timeline, but does not control or direct the manner, methods, tools or schedule by which the Contractor performs the services. The Contractor determines how the work is done.

Own tools and equipment: The Contractor provides and uses their own tools, software and equipment to perform the services.

Multiple clients: The Contractor is free to perform services for other companies and clients simultaneously and is not economically dependent on the Company.

Project-based engagement: This is a project-based engagement with a defined scope and deliverables, not an indefinite employment arrangement.

Compensation

4. Fees and Payment

Fee type: [Fixed fee / Hourly rate / Monthly retainer]
Amount: [Currency + Amount]
Payment schedule: [e.g. "50% on signing, 50% on delivery" / "Net 14 days from invoice"]

No withholding: The Company will not withhold federal or Texas state income taxes or pay employment taxes on the Contractor's behalf. The Contractor is responsible for all self-employment taxes and estimated tax payments.

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Download the full Texas IC Agreement — free

Fill in your details above and download a ready-to-send agreement with Texas-specific classification language.

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What's included in this template

Parties — company and contractor identification with Texas addresses

Services and deliverables — specific scope, milestones and deadline

Texas right-to-control documentation — methods, tools, multiple clients

Project-based engagement evidence — defined scope vs indefinite employment

Compensation — fee type, amount and payment schedule

No withholding acknowledgment — contractor responsible for own taxes

IP assignment — all deliverables assigned to company on full payment

Confidentiality clause — protects company's business information

Non-solicitation clause — enforceable in Texas with reasonable scope and duration

Governing law — State of Texas, applicable to TWC and Texas courts

How to use this template in Texas

Document the right-to-control factors in practice — not just in writing

Texas applies the right-to-control test: the primary question is whether you have the right to control how the work is done, not just the result. A written contract documenting contractor independence is important evidence, but the TWC also looks at actual practice. Do not set the contractor's daily schedule, require them to attend internal meetings as employees, or use company equipment. The agreement documents intent; the working relationship must reflect it.

Non-solicitation clauses are enforceable in Texas — draft them carefully

Unlike California, Texas allows non-solicitation and non-compete clauses for independent contractors when they are reasonable in scope, duration and geographic area. Under Texas Business and Commerce Code §15.50, the clause must be ancillary to an otherwise enforceable agreement (which this IC agreement satisfies via the confidentiality and IP provisions) and contain reasonable limitations. Courts will reform an overbroad clause rather than void it entirely — but it is better to draft a reasonable clause from the outset. A 12-month restriction on soliciting named clients is typically enforceable; a blanket 3-year ban on working in the industry typically is not.

Watch for TWC audits when contractors file for unemployment

The most common trigger for a Texas misclassification audit is a contractor filing for unemployment benefits after a contract ends. If the TWC determines the worker was actually an employee, it can assess back unemployment taxes, interest and penalties — and the determination can cover other workers in similar roles. Make sure each contractor has a clear project-based engagement (not indefinite work), uses their own tools, and has documented evidence of multiple client relationships before classifying them as a contractor.

Get it signed before work begins — Texas recognises e-signatures

Texas adopted the Uniform Electronic Transactions Act (UETA), codified in Texas Business and Commerce Code Chapter 322. Electronic signatures are legally binding. Fill in the form above, download the agreement, and use Bonsai to collect a binding e-signature before the contractor begins any work.

Frequently asked questions

: Texas applies the common law right-to-control test. The primary question is whether the hiring entity controls not just the outcome, but the manner and means of performing the work. Key factors supporting contractor status: the worker sets their own schedule; uses their own tools and equipment; works for multiple clients simultaneously; and the engagement is project-based with a defined scope. Texas is generally more business-friendly than California on contractor classification — there is no equivalent to AB5 and the right-to-control test is less prescriptive.
: No. Texas uses the traditional common law right-to-control test, not the ABC test used in California, Massachusetts and New Jersey. The right-to-control test focuses primarily on behavioral control: does the company have the right to direct how the work is done, not just what outcome to produce? Texas has not adopted an AB5-style presumption of employment. This makes Texas more business-friendly for contractor relationships, but contractor misclassification still carries significant risk with the Texas Workforce Commission.
: Yes, subject to specific requirements under Texas Business and Commerce Code §15.50. A non-compete or non-solicitation agreement is enforceable if it is ancillary to an otherwise enforceable agreement (such as this IC agreement with confidentiality and IP provisions) and contains reasonable limitations as to time, geographic area and scope. Courts apply a three-part test: the duration must be reasonable (typically up to 2 years); the geographic area must be tied to where the company operates; and the scope must be no broader than necessary to protect legitimate business interests. Unlike California, Texas courts will reform an overbroad clause rather than void it entirely.
: A Texas IC agreement should include: parties' details; a specific scope of services and deliverables; compensation and payment schedule; right-to-control documentation (contractor controls methods, own tools, multiple clients, project-based scope); term and termination; IP assignment — who owns deliverables; confidentiality; a non-solicitation clause (enforceable in Texas with reasonable limitations); no employment relationship / no benefits / no withholding; and Texas governing law. Unlike California, you can include non-solicitation and non-compete clauses that meet the §15.50 requirements.
: Generally, no. Independent contractors are not covered by Texas unemployment insurance. However, if the Texas Workforce Commission determines that the worker was actually an employee, it can reclassify the relationship and assess the company for back unemployment taxes, interest and penalties. The TWC audit is most commonly triggered when a former contractor files for unemployment benefits after a contract ends. A well-documented contractor agreement with evidence of IC status reduces this risk significantly.
: Texas misclassification consequences include: back Texas Workforce Commission unemployment taxes plus interest and penalties; potential retroactive workers' compensation liability; IRS back payroll taxes, interest and penalties for federal employment tax obligations (FICA, FUTA); and potential wage claims for minimum wage or overtime if the worker was not paid at least minimum wage for all hours worked. Texas does not have state-specific misclassification penalties as harsh as California's PAGA, but federal exposure (IRS) applies in all states and can be significant across multiple workers.