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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.
Independent Contractor Agreement Sample
INDEPENDENT CONTRACTOR AGREEMENT
THIS AGREEMENT is made as of the [DATE] (the “Effective Date”), by and between [PARTY], with its principal place of business located at [ADDRESS], hereinafter referred to as (“[PARTY]”) and [PARTY], with hers/his/its home address or principal place of business located at [ADDRESS], hereinafter referred to as (“Contractor”).
In consideration of the mutual covenants and promises contained herein, the parties agree as follows:
1. Agreement. [PARTY] hereby contracts with the Contractor as an Independent Contractor to provide various services to [PARTY]. The services Contractor will be providing to [PARTY] are, including, but not limited to, the following:
- [SERVICE 1]
- [SERVICE 2]
- [SERVICE 3]
2. Term. This Agreement shall be effective as of the Effective Date. This Agreement shall continue for a period of [YEARS] years from the Effective Date (the “Expiration Date”), unless terminated earlier as provided herein. The Agreement shall be automatically renewed for additional one-year periods unless either party provides written notice of termination prior to the Expiration Date. Any modification of this Agreement must be in writing and signed by both parties.
3. Compensation. The Contractor will be paid $[COMPENSATION] per month beginning on the effective date of the contract and payable on the last day of the month in arrears and further on the last day of the month every month thereafter until the expiration date or termination date as described herein.
4. Rent Reimbursement. The Contractor will be paid $[RENT] per month, as a partial reimbursement for the NYC office space, beginning on the effective date of the contract and payable on the last day of the month in arrears and further on the last day of the month every month thereafter until the expiration date or termination date as described herein.
5. Taxes. As an independent contractor, the Contractor will be responsible for payment of any federal and state payroll and self-employment taxes attributable to payments received for services performed by the Contractor for [PARTY]. The Contractor will not be considered an employee for federal and state payroll tax purposes. The Contractor shall indemnify [PARTY] in the event [PARTY] becomes liable to pay any federal or state payroll of self employment taxes.
6. Termination. Either party can terminate this Agreement upon a written notice to the other party, either via direct mail or e-mail. Contractor specifically acknowledges and agrees that upon expiration or termination of this Agreement for any reason, the provisions of Sections 4, 5, 6, 7, 9, 11 and 12 shall survive the expiration/termination hereof for a period of one year from such date. Upon termination the Contractor will be due the monies owed to him for every day up to the termination date in a pro-rata fashion and such monies will be due and payable immediately upon said termination. [PARTY] shall be able to suspend Contractor without notice, immediately upon Contractor’s arrest for any crime and shall be entitled to immediate termination of Contractor upon Contractor’s ultimate conviction of any crime.
(a) As a result of contracting with [PARTY], the Contractor has access to information and material belonging to [PARTY] including, but not limited to, products, services and potential products and services, media lists, media costs, profit and loss and other financial information, client lists, pricing information, computer programs, the identity of specialized contractors and management strategies (“Confidential Information”). This Confidential Information was acquired or developed by [PARTY] at [PARTY]'s expense. It is therefore a valuable asset of [PARTY] and its remaining confidential is of extreme importance to the Company. The Contractor acknowledges the importance of keeping all Confidential Information confidential and will not during or for one (1) year after the term of this Agreement, disclose any Confidential Information made available to or acquired by the Contractor in the course of engagement hereunder unless written consent has been submitted by [PARTY]. This provision is not applicable where Confidential Information is required to be supplied by court order.
(b) All Confidential Information and non-confidential information and any other confidential material of third parties made known to Contractor during the Term of this Agreement shall remain the property of [PARTY], and all such documents together with any copies or excerpts thereof and any such other material wherever situate, including, but not limited to the Contractor’s personal computers, laptops, PDA’s, cell phones and other digital and other media, shall be promptly returned to [PARTY] upon request. Upon termination or expiration of this Agreement, Contractor agrees:
(i) To a search of all digital and other devices and other applicable tangible property in his possession, wherever situated, and to return all such Confidential and non-confidential information to [PARTY].
(ii) That he shall, together with a representative of [PARTY], prior to leaving the Company premises, search the pertinent files contained in such devices that are then on [PARTY] premises, to identify and delete/destroy all Confidential and non-confidential information (and/or any material copies thereof).
8. Non-Solicitation. Upon the expiration or termination of this Agreement, the Contractor agrees, for a period of one (1) year after the date of termination, not to directly or indirectly, for themselves or any other entity or person, solicit, seek or accept business from, interfere with or endeavor to entice away from [PARTY] any client, employee. franchisee or contractor of [PARTY]. For the purposes of this section, a client of [PARTY] is any person or entity other than a person or entity brought to [PARTY] by the Contractor that conducted business with [PARTY]. For the purposes of this section, an employee or contractor of [PARTY] shall include employees or contractors no longer working with [PARTY] but who worked with [PARTY] in the one (1) year preceding the date of termination.
9. Condition Precedent. In addition to the provisions of paragraphs 6, 7 and 8 above, as an express condition of [PARTY] entering into this Agreement and in consideration of the mutual promises and conditions stated herein, the Contractor agrees to execute the attached “INDEPENDENT CONTRACTOR NON- CIRCUMVENTION & CONFIDENTIALITY AGREEMENT” as a condition precedent to [PARTY] execution hereof.
10. Injunctive Relief. Contractor acknowledges that a breach of this Agreement will give rise to irreparable and continuing injury to [PARTY]. As such, the Contractor agrees that [PARTY] or its successors and assigns may obtain injunctive relief against the Contractor to prevent the continued breach or threatened breach. If any court refuses to enforce this Agreement because it is more broad than necessary to protect [PARTY], this Agreement shall be modified by time, geographic area, or scope of business to accommodate the court and the remainder of this Agreement shall not be affected.
11. Complete Agreement. This Agreement shall be the sole agreement between the parties and supersedes any prior agreement, written or oral, between the parties. Each party acknowledges that they have relied solely on their own judgment in entering into this Agreement and not on any representation not stated herein from the other party.
12. Governing Law. This Agreement shall be governed by the laws of the State of [STATE] without regard to the conflicts of laws. The parties agree that all disputes arising from this Agreement shall be heard by a court of competent jurisdiction in [LOCATION]. Any dispute shall be heard by a judge and not a jury. EACH PARTY HAS HAD AN OPPORTUNITY TO REVIEW THIS AGREEMENT WITH COUNSEL, SPECIFICALLY THIS SECTION WHICH RESTRICTS THE PARTY’S RIGHT TO TRIAL BY JURY.
13. Miscellaneous. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, successors and assigns. The invalidity or unenforceability of any provision of this Agreement shall not affect the other provisions hereto and this Agreement shall be construed in all respects as if such invalid or unenforceable provisions were omitted. All notices shall be communicated to the addresses set forth for each party in the preamble of this Agreement. In the case where legal action is brought to enforce this Agreement the prevailing party shall be entitled to recover reasonable attorneys’ fees and costs for enforcement, including all appeals. This Agreement may be assigned by [PARTY]; however, the Contractor may not assign this Agreement. This Agreement shall survive the sale of [PARTY].
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date and year first written above.
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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