The term "independent contractor" is a term that generally describes a paid service provider who is not an employee. The term is used in many contexts in business law, ranging from taxation to agency law. In this entry, we discuss the definition of independent contractor from the perspective of agency law.
The independent contractor is a service provider who does not have an employer-employee relationship with the person hiring him or her. The independent contractor may or may not be an agent, depending on the degree of control exercised by the hiring party over the contractor. If the hiring party has even more control, especially the right to control the "physical conduct" of the hired party, that service provider will cross over into becoming an employee, which is a special category of agent.
In general, businesses would like to classify service providers as independent contractors rather than employees for a variety of reasons. For example, in general independent contractors' physical torts do not create liability for the person hiring the indpendent contractor under respondeat superior (although there are exeptions). There are also a variety of non-agency reasons businesses seek to classify service providers as independent contractors, such as not having to pay FICA taxes on independent contractors and the inapplicability of certain labor and employment rules.
For all of theses reasons the courts are skeptical of claims that a person who appears to be an employee is really an independent contractor, and the parties' agreement will not be determinative the legal construction of the relationship between the parties.