Having a written agreement in place will help define the responsibilities and roles of an independent contractor. It can help you avoid disputes, protect you from liability and keep you out of court. It can also help clear up confusion over worker classification, payments, deadlines, dispute resolution, etc. Lexyom’s lawyers are at your service when it comes to preparing an Independent Contractor Agreement that will help you avoid lawsuits and costly mistakes.
So the question is: Why do you need an ‘Independent Contractor Agreement’?
1- Worker Classification: As an employer, if you are not clear about the classification of your employees, you may be in danger of overcharging taxes for your business. Having the wrong classification affects your business. Even if you agree that the worker is an independent contractor it does not imply that the IRS will agree with your classification unless it is clear, based on the IRS guidelines, that the individual is actually an independent contractor. Once you have defined the worker as an independent contractor, clearly define them as such in your agreement. Always stay up to date about changes regarding the worker classification. If you are an independent contractor, you should also understand these guidelines. If you are being treated as an employee under the IRS guidelines, you may be entitled to employee benefits and your tax liability may vary. In case you have any question, reach out to us, so we explain it all to you.
2- Responsibilities: Display the nature and the details of the work. Explain the materials to be used, expenses, workspace, development, delivery, etc., and provide clear communication lines. This will help avoid conflicts and minimize delays simply by identifying some helpful points which are, but are not limited to: the primary point person for both parties, the preferred method of communication, the meetings to monitor progress, and/or finished work.
3- Deadlines: Not meeting deadlines is often a point of contention. Having clear expectations and deadlines can help avoid this mistake. It can also be very costly if you fail to meet these deadlines. Independent contractors must make sure they can meet these deadlines prior to signing, especially if they’re facing financial repercussions for failing to complete work on time.
4- Payment: Spell out the cost of the work to be done and how it will be billed and paid. If any additional work is required that falls outside the scope of the agreement, how will it be billed?
5- Taxes: Your agreement should also state that the independent contractor must pay their own state and federal income tax.
6- Liability and Licensing: Thoroughly confirm that the independent contractor has the necessary liability insurance and is fully licensed by the state and any other relevant regulatory agencies.
7- Intellectual Property and Competition: You should also include the ownership of the intellectual property that was created by the independent contractors under the agreements. You should also include a nondisclosure agreement, which prevents the independent contractor from disclosing your information to other competitors. If your contractor has access to sensitive customer payment or personal data, such as credit card information, you may want to ask them to sign a confidentiality agreement.
8- Dispute Resolution: This type of contract may require that disputes be resolved through mediation. It avoids some legal fees in the event of disputes but may not always be in the best interests of the parties.
9- Termination: Set the duration of your agreement. Will the agreement end after a year or once the work has been completed? Who can terminate it prematurely and under what conditions?
Those are the key elements for why you should have an attorney help you prepare an Independent Contract Agreement before it’s too late. Don’t wait until a breach occurs to fall back on your Independent Contractor Agreement. Start proactively preparing and enforcing one today!
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