Did you know that you are NOT legally required to use a written agreement between you and any independent contractor you hire 🤔? That being said, there are situations in which you should most definitely use a simple contractor agreement – and times in which one may not be sufficient.
The first and most important aspect of working with a freelancer is understanding the legal requirements to do so. Understanding employment law is an essential part of protecting yourself and your business from legal issues in the future.
Therefore, before hiring any kind of subcontractor, it’s important to have total confidence 👍 that they are, in fact, that type of worker.
More specifically, freelancers or independent contractors must be working under their own direction. In other words, you should not 🙅♂️ be providing them with specific instructions for creating the final product that you’ve agreed upon.
For more information on the definition of an independent contractor, check out the IRS website.
However, even if you’ve already determined that you are following the legal guidelines for working with a freelancer, you must now decide whether you want to use a written ✍️ contractor agreement.
✳️ REASONS TO USE A WRITTEN AGREEMENT ✳️
Any time you work with a contractor on an outside project, you and your business benefit from a written agreement for the following reasons:
✔️ Since you cannot legally control a freelancer’s work process, a written agreement ensures a mutual understanding 🤝 of the expected final product
✔️ An official agreement defines your relationship with the contractor as one of non-employment; this protects you from a lawsuit for not providing proper benefits
✔️ Providing a concrete outline of payment 💰 amount and methods will help avoid discrepancies regarding compensation in the future
✔️ You may choose to include a non-disclosure clause to ensure your business’ confidential information remains as such
✔️ A termination clause can provide guidelines for ending ❌ the relationship
While your partnership with a contractor may not legally require a written agreement, these benefits prove the value of implementing one.
✳️ CALIFORNIA’S NEW AB5 LAW AND CONTRACTOR AGREEMENTS ✳️
If you’re doing business with a freelancer in California or are based in the state, new independent contractor laws ⚖️ provide even more incentive to utilize a simple contractor agreement.
More specifically, California’s new AB5 law requires that gig workers pass the “ABC” test in order to qualify as non-employees:
The contractor must be free from the control and direction of the hiring party ⚠️
The contractor’s work must be outside the normal course of business of the hiring party ⚠️
The contractor must be engaged in the same type of work as an independent trade outside of working with the hiring party ⚠️
Passed earlier this year to protect the rights of freelance workers, the AB5 law has added pressure for businesses working with independent contractors to utilize a simple contractor agreement.
Therefore, California businesses or those working with freelancers based in California should always create a written agreement 📋 that outlines the ways in which the gig worker passes the “ABC” test. This way, the worker cannot be misclassified in future tax forms or legal situations.
✳️ WHERE TO FIND SIMPLE CONTRACTOR AGREEMENTS ✳️
Luckily, you do not always need to consult an attorney for help writing a contractor agreement. In fact, you can actually download fill-in-the-blank forms 📝 from legal professionals – including attorneys! – for free or a low fee on their website!
Once you download these documents, you simply add your personal details and sign and date, and then send over to the contractor to do the same!
However, be sure to always obtain your legal templates from reputable legal websites. Believe it or not, many layers will provide you access to the same forms they use for their personal businesses 💁♂️!
Therefore, when you use a DIY simple contractor agreement straight from an attorney, you can be confident that you’re using an effective and trustworthy document to protect yourself and your business from legal trouble.