Contractor agreements are known by many alternate names, such as Independent Contractor Agreement, Subcontractor Agreement, Consulting Agreement, Freelance Contract, General Contractor Agreement, Consulting Services Agreement or Master Service Agreement.
What is an independent contractor?
An in dependent contractor, also known as a gig worker, a consultant or freelancer, is an individual that is typically self-employed and provides a service for a customer in exchange for monetary compensation.
Contractor contracts provide legal protection, define compensation, and establish roles and responsibilities. They would outline services to be performed and list any pre-determined outcomes of the work. The agreement would typically define ownership of work product. The expectations for both parties are typically covered in the agreement.
The exact language and sections included may vary based on your industry, client type, and location.
A standard contractor agreement would include the following:
1. Statement of Relationship
It is important to start by defining the relationship. This information is important for both parties. Note, if you ever needed to prove your tax status, this agreement could be helpful. The business could use it as protection in a situation where they are being accused of employee misclassification. You may decide to include that you have sole discretion of how, when, and where you fulfill the terms of your independent contractor agreement, and that you are responsible for providing the tools needed to perform the work. Your lawyer will help you determine if that information is needed.
2. Project Description
Define the scope of the work, so you are on the same page as your client. List the tasks and deliverables that the client expects. It can be helpful to add a clause about scope creep and how it will be handled.
3. Payment and Billing Terms
It is important to define total compensation, timeline for payments, how late payments will be handled and if transfer of work is tied to compensation.
4. Responsibilities of Each Party
Be specific about all parties involved and exactly what their responsibilities are. It may make sense to define how conflicts or non-compliance will be addressed in the event that it becomes an issue.
5. Project Timeline and Deadlines
Outline milestones and deadlines for deliverables and define what the client expects. It can be helpful to identify dependencies and how it will be handled if supporting materials are not provided, causing a delay in deliverables.
6. Termination Conditions
Termination conditions outline the rights of both parties to cancel an independent contractor agreement. This is an important section to include to ensure protection in a worst-case scenario.
7. Nondisclosure Terms, and Confidentiality and Non-Compete Clauses
This is an area that needs to be discussed with a lawyer. Non-compete may be important to your client and not reasonable for you. Given the nature of your contract work, it is likely you will work with other clients in the same industry. It is important to establish any baseline information you have coming into the relationship, since that may be applicable to the NDA portion. This section is important to work with a lawyer on, seemingly simple statement could be problematic down the road and tie you up in messy litigation.
Who should use Independent Contractor Agreements?
Contractors, freelancers, or consultants should have a document in place to protect them, especially if they are investing a lot of time into a project. Similarly, customers, clients, or businesses who hire freelancers may wish to outline the terms of service in a formal contract.
What is the difference between an independent contractor and an employee?
Here are some common differences between contractors and employees.
Independent Contractor
- Has a personal investment in contracting business and may incur profit and loss as a result
- May have more than one customer
- Sends invoices to the customer
- Uses their own tools or equipment
- Has signed an Independent Contractor Agreement
- May hire employees or subcontractors to help complete services
- Does not receive employment benefits from clients or customers
Employee
- Employer controls how the employee’s work is carried out, and when and where the employee works
- Employer controls the employee’s wages
- May receive employment benefits, such as medical, pension, vacation, or sick pay
- Has signed an Employment Contract
- Receives in-house training
Does the employer or contractor need a lawyer for Contractor Agreements?
There are questions and potential problems related to the classification of a contractor versus an employee. Businesses would be well served to work with a lawyer to ensure they aren’t inadvertently creating a document that could be used against them if it is determined the worker was misclassified. The costs of a situation like this are enough to justify the involvement of an experienced lawyer to ensure your protection.
For contractors, you want to ensure you are also protected and the terms are favorable to you. In many cases, the business will use a legal team to create the agreement and the contractor doesn’t involve a lawyer to determine if their protection is adequate.
There are many legal and practical considerations in an agreement like this. It is worth investing in your protection. An experienced lawyer will know how to address misclassification issues, termination clauses, contractual damages, non-compete and non-solicitation clauses as well as non-disclosure terms.
Contractors – your legal rights are defined in this contract; it is in your best interest to ensure that the contract is specific to your needs and not a free template you found online – that may not have been created or reviewed by a lawyer.
CEO Law offers three tiers to service to ensure you get the protection you need that fits within your budget and costs are controlled.
Option One: Create a customized Contractor Agreement by entering your personalized information into our document generation engine
Option Two: Have an already drafted Contractor Agreement reviewed
Option Three: Have a Contractor Agreement drafted by a senior lawyer
Learn more about all three options now.
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