People who work for a business generally fall into one of two categories: an employee or an independent contractor. Some employers have their employees sign employment agreements. But it can also be important to have the same type of arrangement with your independent contractors. Having an independent contractor agreement can save a business some grief if disputes arise and peace of mind in general.
Independent Contractors Are Different Than Employees.
Control and independence are two factors that employers should consider when classifying employees. Namely, how much control does the business have over the worker? How independently does the worker perform his or her duties?
What the company pays for is also important. If the business controls payments and offers benefits, the worker might be an employee. Companies that provide tools to workers may be indicating that they are employees and not independent contractors.
Finally, companies may have workers sign contracts. This can make a difference in whether they are employees or independent contracts.
IRS guidelines provide vital information to help companies understand their workers’ status – especially determining whether they are employees or independent contractors.
Contracts and agreements provide crucial details about the working relationship with vendors, suppliers, and clients. For companies that hire non-employee workers, the independent contractor agreement is crucial.
What to Include in an Independent Contractor Agreement
Having an agreement in writing can make it easier to enforce. Of course, that depends on how it is written and its provisions. Some of the most common provisions include:
- Details about the nature of the work.
- Definition of the independent contractor status.
- Payments to the independent contractor for work and job-related expenses.
- Eligibility or lack of eligibility for benefits.
- Insurance – what is required and who pays for it.
- Terminating the contract, specifically when it will terminate or how.
- Dispute resolution, possibly including mandatory arbitration clauses.
- Restrictive covenants, including those prohibiting workers from sharing the company’s confidential information.
We strongly encourage you to have an experienced business lawyer draft important legal documents.
Why an Independent Contractor Agreement Is Important
The agreement can protect both parties. The independent contractor has full knowledge of their working relationship. Employers can treat the worker as an independent contractor, not a full employee.
As mentioned above, having the agreement in writing could allow the parties to clear up disputes without resorting to litigation. If one does have to sue the other, a well-written independent contractor agreement could become the most important piece of evidence.
For example, XYZ Widget Company has 30 employees. They decided to hire several more workers but don’t know how long their services will be needed. After carefully reviewing IRS guidelines, they may decide the workers are independent contractors. This completely changes how the workers will be paid and how much the employer pays in taxes.
At some point, each new worker could be required to sign an independent contractor agreement stating they understand their employment status and other work-related issues. Both parties can refer back to the agreement if disputes arise.
Call to Discuss Drafting Your Company’s Independent Contractor Agreement
Attorney Richard Sierra at the Florida Small Business Center assists clients like you with business and litigation matters. As always, Our Goal Is to Help You Succeed™. For an appointment, you may call us at 1-866-842-5202 or use the contact form on our website. We represent clients throughout the State of Florida, including Coral Springs, Coconut Creek, Boca Raton, Delray Beach, Pompano Beach, Sunrise, Fort Lauderdale, Miami, West Palm Beach, Jupiter, Deerfield Beach, Stuart, Port St. Lucie, Orlando, Naples, Fort Myers, Sarasota, Tampa, and surrounding communities.