What to Include in an Independent Contractor Agreement

Entrepreneurs often turn to independent contractors to help with specific tasks and buy back their time. Whether you're a seasoned business owner or a startup, establishing clear expectations and terms with your independent contractors is crucial for a successful collaboration. In this blog, we'll delve into the essentials of drafting a robust independent contractor agreement and our top 10 clauses to absolutely include. From defining the scope of work to addressing payment terms and protecting intellectual property, we'll guide you through the key elements that should be included to foster a positive and productive working relationship with your independent contractors.

These are our best practices and legal considerations to ensure a mutually beneficial relationship for both parties.

What is an Independent Contractor Agreement?

Let's break it down: what exactly is an independent contractor agreement?

An independent contractor agreement is more than just a piece of paper – it's a legally binding contract linked between a 1099 worker and the company bringing them on board. This document does the heavy lifting by clearly defining the scope of work and the terms governing the entire project or work to be performed.

Now, why is maintaining a crystal-clear line between your contract workers so crucial? It's all about safeguarding your legal interests. By doing so, you prevent any potential back-and-forth where a contract worker claims they missed out on certain perks exclusive to employees (such as benefits, overtime pay, unemployment pay, etc.). The independent contractor agreement steps in as your superhero, drawing that unmistakable line between freelancers and full-time team members, keeping things sharp and distinct.

This agreement isn't just a formality – it's your necessary roadmap. It sets expectations for both sides, from nailing down the project timeline to ironing out the nitty-gritty of how your contractor will be compensated. And, just in case the unexpected happens, it charts a course for resolving disputes. Even if it seems a bit much, especially for smaller projects, having both parties put pen to paper is like saying, "Hey, we're committed to this end result and I will pay you X amount to get there." In essence, you're ticking off all the boxes for a seamless and successful collaboration with your contractor.

Here are key clauses you’ll want to include in your Independent Contractor Agreement:

1. Scope of Work Clause: This clause should be the very first clause in the contract. Clearly define the tasks and responsibilities the independent contractor is expected to perform and fulfill. Be specific about project deliverables, deadlines, and any other relevant details to avoid misunderstandings. Also include that no hours are guaranteed and the contractor will be hired on a project-by-project basis.
2. Fee Clause: Usually, right after the Scope of Work clause comes a fee clause. This outlines the agreed-upon compensation structure, including the method and frequency of payment. Specify whether the contractor will be paid a flat fee, hourly rate, or monthly rate.
3. Work Relationship Clause: Clearly state that the worker is considered an independent contractor and not an employee. This declaration is important for tax purposes, as independent contractors are responsible for their own taxes and benefits.
4. Confidentiality Clause: Include a clause that protects your business’s sensitive information and intellectual property. Clearly define what information is considered confidential and outline the contractor's responsibilities regarding the handling of such information.
5. Term & Termination Clause: Clearly outline how long the agreement is valid for and the conditions under which either party can terminate the agreement. This includes factors such as breach of contract, failure to deliver, or completion of the project. Be sure to explain that either party can terminate at any time, but that all work performed by the contractor up to that point will be paid out.
6. Insurance and Liability Clause: Mandate that the contractor is required to carry liability insurance and specify the extent of coverage. This helps protect both parties in case of unforeseen events or accidents during the course of work because your business insurance will exclude coverage for any contractors’ mistakes and negligence.
7. Work Product Clause: This is a copyright clause that clearly defines who retains ownership of any intellectual property created during the engagement. Usually, it would be a ‘Work Made for Hire’ situation where the contractor’s work product would automatically assign to the company.
8. Non-Disparagement Clause: This clause is a dual-party clause where both parties agree to not disparage the other party and damage their reputation. Highly recommended to have this clause with the easy ability for contractors to post bad reviews online or talk badly about your company to the next person they work for.
9. Representations and Warranties Clause: First, make the contractor represent and warrant that they don’t have any other employment or contract work that would prevent them from fully performing the work agreed to. Next, explain that your company will not make any specific accommodations for the contractor to get their work done. And, finally, mandate that the contractor is expected to use their own tools, equipment, platforms, internet, and workspace. This distinction further reinforces the independent nature of the contractor.
10. Non-Solicitation Clause: This clause will mandate that the contractor cannot take your clients from you upon termination or solicit any clients from your company during their working relationship with your company. (Note: this type of clause CAN be included in a contractor agreement but a non-compete clause CANNOT!)

Wondering if you should hire out a lawyer to help you draft this type of document up? Not necessary! The Legal Paige created a straightforward independent contractor agreement that’s the game-changer you need. We've got you covered with our downloadable template tailored for seamless use by any online business owner. No need to break the bank on legal fees – check out our Independent Contract Agreement HERE and empower yourself with the tools to navigate independent contractor agreements like a pro. When it comes to legal simplicity, The Legal Paige has your back! 

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