Independent Contractor Agreement

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What Is an Independent Contractor Agreement?

An independent contractor agreement is a contract between a freelancer and a company or client outlining the specifics of their work together. This legal contract usually includes information regarding the scope of the work, payment, and deadlines. The agreement might also provide guidance regarding any confidentiality requirements, insurance, and indemnification.

Independent contractor agreements go by many names, including:

  • Independent Contractor Contracts
  • Subcontractor Agreement
  • Freelance Contractor Agreement
  • Contract Labor Form
  • Consulting Agreement
  • Freelance Contract
  • General Contractor Agreement
  • Consulting Services Agreement

What Are the Elements of an Independent Contractor Agreement?

Most independent contractor agreements include the following information at a minimum:

  • Parties: The contract starts by listing all associated parties, like the independent contractor, the client or hiring company, and the contact information for each party.
  • Time frame: Most contracts include specific deadlines. Depending on the scope of the project, the contract may include multiple deadlines for various work products while others might just list a deadline for the final product.
  • Services: This section of the contract details the specifics of the work the freelancer will perform.
  • Compensation: Depending on the type of project, the compensation section will either provide an hourly wage or the total compensation for the project.
  • Confidentiality: If there are necessary confidentiality protections for the project, this clause outlines those expectations.
  • Termination: Some contracts might include an "option to terminate early" clause depending on the project. Most contracts include a section that the client and freelancer initial to indicate they have completed the work and provided payment, effectively terminating the contract.
  • State of governance: List the state under which the contract falls and which will enforce the specifics of the contract if necessary.
  • Signatures: All parties listed at the beginning of the contract should sign and date in designated locations.

Some contracts require additional clauses and information. You can customize an independent contractor agreement to meet the specific needs of your project.

What Is the Purpose of an Independent Contractor Agreement?

Independent contractor agreements serve to protect all parties involved in the transaction. The contract sets clear expectations for the work and end product and provides legal protections for the independent contractor and company or client.

With the contract in place, independent contractors can usually work in the manner they prefer while the company or client does not have any responsibility for their tax obligations.

Independent contractor agreements are only for external freelancers. Company employees do not operate in the same way as independent contractors and thus do not require these agreements.

Confidentiality is a major concern for some companies. Hiring an outside worker can cause some apprehension for keeping company practices internal. Independent contractor agreements often include a clause regarding confidential information, expectations, and consequences in order to protect the company.

When Should You Use an Independent Contractor Agreement?

It's prudent to use an independent contractor agreement if you are one of the following:

  • An independent contractor
  • A client hiring an independent contractor
  • A company hiring an independent contractor

Independent contractors might draw up a contract and present it to their client before beginning the project. Alternatively, the client might produce the contract for the independent contractor to sign, or they might work together to create a contract together.

When a company hires an independent contractor, it's most common for the business to provide the contract for the freelancer rather than the reverse.

Independent contractor agreements are mutually beneficial and protect all parties, so it's in the best interest of everyone involved to draft and sign one.

Benefits of Using an Independent Contractor Agreement

Independent contractor agreements offer a host of benefits for all parties involved in the project. For companies that hire independent contractors, these agreements:

  • Protect the company's business interests
  • Offer liability protections
  • Secure the company's assets
  • Ensure the freelancer maintains confidentiality

For freelancers, these agreements:

  • Ensure they get paid the pre-determined rate for their work
  • Offer professionalism when working with clients by presenting a formal contract rather than a verbal agreement
  • Provide clear guidelines and expectations for their work

For clients who hire freelancers to complete projects, these agreements:

  • Provide legal protection in the case of an unfinished or unsatisfactory job
  • Ensure the project is finished in a set amount of time
  • Secure the opportunity to terminate the project if it's not working well

What Is the Difference Between an Independent Contractor and an Employee?

If you're considering hiring someone to perform a job, make sure you know whether you're hiring them as an independent contractor or as an employee. These roles have important distinctions that could impact you and the freelancer or employee negatively if mislabeled.

Independent contractors usually demonstrate these characteristics:

  • Are self-employed
  • Use their own equipment or tools to perform their work
  • Complete 1099 tax forms
  • Invoice their clients
  • Do not require much, if any, client oversight from day to day
  • Work on fixed-term or temporary projects
  • Do not receive any employment benefits from their client or hiring company

Employees of a company, by contrast, usually show these characteristics:

  • Were hired by a single company to work exclusively for them
  • Complete W-2 tax forms
  • Have workflow controlled by their employer
  • Have wages set by their employer
  • Receive employee benefits like health insurance, paid time off, or other perks
  • Have an employment contract with the company
  • Participate in employee reviews
  • Receive in-house training from their company

How To Write an Independent Contractor Agreement

While independent contractor agreements are often straightforward, they are binding legal documents, so it's important that you ensure the information included is accurate. If you want to create an independent contractor agreement, you have a couple of options. First, you can use a template to guide you through the process of creating your own unique contract. If you don't have many special considerations, this is probably the easiest way to create an independent contractor agreement.

However, if your contract has unique complexities due to the nature of your work, you should consult a contract attorney to help you create an individualized independent contractor agreement to ensure all parties involved in the project are appropriately protected.

Related Documents

After you create your independent contractor agreement, you might consider adding a few other related documents to your file to ensure every aspect of your job is well-described and protected.

  • W-9 Form: A W-9 form is a tax form that independent contractors and their hiring company or clients must complete. It's different from a W-2 form, which is required for employees.
  • Non-Compete Agreement: This agreement ensures that an independent contractor won't work for a competitor for a set period of time, usually during the course of the project.
  • Non-Solicitation Agreement: This agreement ensures that the independent contractor won't take the hiring company's clients with them after they finish the job.

Independent contractor agreements are useful legal tools to help protect every disparate party working on a unified project. Make sure your independent contractor agreement includes every important aspect of the job to ensure timely and accurate completion as well as protection for you, your company, and your clients. Seek guidance from a qualified contract lawyer if you need help creating a unique independent contractor agreement.

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