What is an Independent Contractor Agreement?

An Independent Contractor Agreement sets out the terms of a working relationship between a contractor and a client. It covers the services to be performed, payment, deliverables, ownership of work, and when and how the contract can end.

It's also known as a contract for services, freelance contract, consulting agreement, or service contract.

An Independent Contractor Agreement is different from:

• An Employment Contract, which governs an employer-employee relationship and triggers obligations like vacation pay, source deductions, and statutory entitlements.
• A Partnership Agreement, which sets out a shared business venture between co-owners rather than a client hiring a contractor to deliver a defined service.

You can use LawDepot’s agreement in every Canadian province and territory. Our questionnaire tailors clauses to comply with your jurisdiction’s laws.

Independent contractor vs. employee in Canada

An independent contractor runs their own business and decides how the work gets done. 

An employee works under the direction of an employer, who controls the work and withholds tax, CPP, and EI from salary or wage payments. 

Whether a worker is an independent contractor or an employee affects their rights, tax obligations, and the protections they're entitled to under provincial and federal law. In some workplaces, workers are hired as "independent contractors" to avoid employment rights and benefits.

The label on a contract doesn't decide the question. The Canada Revenue Agency (CRA) and the courts assess the real working relationship using the Total Relationship Approach to determine whether someone is an employee or self-employed.

How the CRA determines employee or self-employed status

Key factors the CRA weighs in on and questions they may ask include:

• Control: Who decides how, when, and where the work gets done?
• Tools and equipment: Who provides what's needed to do the job?
• Subcontracting and help: Whether the worker can hire someone else to do the work
• Financial risk: Whether the worker can profit or lose money on the engagement
• Responsibility for investment and management: Who runs the operation?
• Opportunity for profit: Whether income depends on managing the work, not just hours put in

Canadian law also recognizes a middle category called a dependent contractor — a worker who is technically self-employed but economically reliant on one client. Dependent contractors can be entitled to reasonable notice on termination, similar to employees.

Misclassifying an employee as a contractor can lead to tax liabilities, CPP, and EI contributions, as well as possible penalties and wrongful dismissal claims.

Here is a quick comparison to understand some of the differences between an independent contractor and an employee:

If you're unsure whether the terms and conditions of the working arrangement would make the worker an employee or a contractor, consult a lawyer for guidance.

Key benefits of using an Independent Contractor Agreement

A written agreement protects both sides of the relationship and reduces the risk of disputes by providing certainty on the terms. 

With a LawDepot Independent Contractor Agreement, you can:

• Define the scope of work so both parties know what's being delivered
• Lock in payment terms, including rate, billing method, invoicing, and late-payment interest
• Detail the autonomy of the contractor in delivery of the services
• Assign intellectual property rights to the client or contractor
• Protect confidential information during and after the engagement
• Set clear end dates and termination rights to avoid open-ended commitments
• Tailor terms to your province or territory through a guided questionnaire

Our template is legally reviewed and updated, and the questionnaire sets the governing law and court jurisdiction based on the province you select.

When to use an Independent Contractor Agreement

Use an Independent Contractor Agreement any time you hire (or are hired as) a self-employed worker for a defined project or service. Common examples include:

• Skilled trades: Electricians, plumbers, carpenters, painters, landscapers, and construction workers
• Creative and digital work: Graphic designers, writers, web developers, photographers, and videographers
• Professional services: Consultants, bookkeepers, marketers, and project managers
• Home and commercial services: Cleaners, caterers, movers, and personal trainers
• Technical services: IT support, computer services, and software development

If you're hiring another contractor to help with work you've already been contracted to do, use a Subcontractor Agreement instead.

What should be in an Independent Contractor Agreement

A complete Independent Contractor Agreement covers the core terms of the working relationship, plus any optional protections suited to the engagement.

These core clauses include:

• Parties: Full legal names and addresses of the client and contractor
• Services: A detailed description of the work to be performed
• Term: Start date and how the contract ends (on completion, on a fixed date, or ongoing)
• Compensation: Flat fee, hourly rate, or other billing method, plus tax treatment
• Payment terms: Invoicing schedule, payment timing, and late-payment interest
• Contractor status: The contractor has full autonomy in the delivery of the services
• Expenses: Whether the client reimburses work-related costs, and any approval rules
• Intellectual property: Who owns work created under the contract
• Confidentiality: What information is protected and for how long; a separate Non-Disclosure Agreement may be used if the working conditions change and the contractor has access to more confidential information than previously
• Termination: set what notice is required to end the contract
• Governing law: The province or territory whose laws apply to the contract and whose courts will have jurisdiction over any disputes.

Additional clauses you can consider for your agreement can include:

• Non-solicitation of clients or staff after the contract ends
• Insurance requirements, such as liability coverage
• Dispute resolution through mediation or arbitration
• Indemnification for losses caused by one party's actions
• Limitation of liability to cap damages

If you need to change terms after signing, use an Addendum to record the update without rewriting the full contract.

How to write an Independent Contractor Agreement

You can build a customized agreement in minutes using the LawDepot questionnaire. Each step adjusts the document based on your answers.

Step 1: Set location and service duration

First, select an option for how long the service is needed:

1. For a single job (i.e., until the work is completed)
2. A fixed term if there is a specified end date
3. Indefinitely for ongoing or recurring work

Then, choose the province or territory where the work will be performed. Your agreement will then update to comply with that jurisdiction's applicable law.

Step 2: Describe the services

Write a clear, specific description of what the contractor will do. For example: "Design and build a free-standing tool rack for showroom display."

The service details you include will be used to build a bullet-point description of "the Services" in the output document.

Step 3: Identify the parties

Enter the contractor's and client's details:

• Whether each party is an individual or a corporation/organization
• Full legal name
• Complete address, including city, province, and postal code

Step 4: Configure billing and payment

Set out how the contractor will be paid by including:

1. The billing method (e.g., flat fee or hourly rate)
2. Fee amount
3. Tax treatment (e.g., plus or including sales tax)
4. Required retainer, if applicable
5. Payment frequency (e.g., when services are complete or at set milestones)
6. Late payment details (i.e., when invoices must be paid and applicable contractual interest)

Step 5: Set terms, expenses, and termination

Set the required notice by which either party can terminate the contract. 

Some additional terms you can incorporate into the agreement include:

• Expenses: Choose whether the client will reimburse work-related expenses, and whether those expenses need pre-approval
• Intellectual property: Assign ownership to the client or the contractor
• Confidentiality: Apply confidentiality indefinitely, until the agreement ends, or not at all

Step 6: Include any additional clauses

Add custom terms only if you need them. Most agreements don't require extras.

After entering the signing date (or selecting “Unsure” to leave the date blank) and choosing whether witnesses are required, you can also eSign your completed agreement with LawDepot to help create a faster turnaround.

Independent Contractor Agreement FAQs