A: Independent contractors are separate ("independent") from the recipients of their services ("clients"). Clients do not make payroll deductions and withholdings from their independent contractors' pay like they would for their employees' pay. Rather, independent contractors are responsible for handling their own taxes.
Ideally, independent contractors should have ongoing tax support to help ensure compliance with the tax regulations, as well as legal support of a knowledgeable attorney to review or help negotiate contract offers.
A: While an independent contractor agreement is not absolutely required to include terms and conditions regarding confidentiality, including such terms and conditions can help protect both the hiring party and the contractor. An independent contractor agreement that does not address confidential information can potentially exposes the contractor to unnecessary risk and liability. For example, the hiring party could claim that the contractor improperly disclosed or used its confidential information, although the parties have not agreed to what would constitute improper disclosure or use.
If you have already signed an independent contractor agreement, you can attempt to negotiate an amendment to the agreement. A North Carolina attorney who is knowledgeable in independent contractor agreements and confidentiality clauses should be able to advise about amendments or even help negotiate additional or amended terms and conditions.
A: In North Carolina, there are numerous potential pitfalls for independent contractor agreements. A few general pitfalls include:
1. Classification: An independent contractor agreement should properly establish that the relationship is intended to be an independent contractor relationship (not an employment relationship). The agreement should include terms and conditions that make the intended nature of the relationship absolutely clear.
2. Compensation: An independent contractor agreement should properly address the contractor's compensation. The agreement should not include references to terms typically reserved for employment relationships (like "salary" or "exempt/non-exempt").
3. Control: An independent contractor agreement should demonstrate that the hiring party will not control the contractor like it would an employee. The agreement should not include terms and conditions that unlawfully or unnecessarily limit the contractor's rights (like the right to provides services to other clients to generate independent income).
4. Criteria/Qualifications: An independent contractor agreement should establish that the contractor is qualified to provide the services "independently" i.e. without the hiring party providing training or supervision. The agreement should not include terms and conditions that demonstrate an improper degree of control (like probation, performance reviews, or discipline).
There are also pitfalls that are based on such factors as the industry or nature of the hiring party's business, the nature of the services the contractor will be performing, or the nature of the relationship between the parties.
To be fair and equitable, an independent contractor agreement must respect the various laws governing independent contractor relationships. For example, a worker should not be required to accept a role as an "independent contractor" if the hiring party intends to control the worker like an employee.
A North Carolina attorney who is knowledgeable of independent contractor relationships can assist with an independent contractor agreement. Consult with a knowledgeable attorney to help ensure you avoid some common pitfalls in independent contractor agreements.
A: A business that hires an independent contractor should be careful not to confuse an independent contractor relationship with an employment relationship. Treating an independent contractor like an employee can result in the law ultimately determining that the contractor is actually a "misclassified" employee.
In North Carolina, "performance metrics" typically apply to employees, not independent contractors. This is because the "independent" in "independent contractor" means that the hiring party does not "control" (manage, monitor, supervise, etc.) the contractor like it would an employee. The hiring party is entitled to hold the contractor accountable for the results that it hires the contractor to achieve. However, the independent contractor is entitled to determine the manner, means, and methods of achieving the desired results.
With that all being said, it is important for the parties to an independent contractor relationship to have clear expectations. An independent contractor agreement should outline the essential terms and conditions of the engagement. These might include such terms as definitions of the deliverables, deadlines for the deliverables, remedies for the independent contractor's failure to produce the deliverables by the agreed-upon deadlines, and special considerations.
A knowledgeable North Carolina attorney can advise on the legalities of the proposed terms and conditions of an independent contractor relationship that is to be governed by North Carolina law.
