What Is An Independent Contractor Agreement?
The pandemic tanked some sectors of the economy, but it caused an exponential growth in the gig economy. As more and more people lost their full-time jobs or opted to work from home 👨💻, they found alternative sources of income 💰 in independent contracts. This includes many types of workers, from business professionals to YouTube stars and influencers 🤳. Now, what is an independent contractor agreement?
Since communication 🗣 between the contractor and the client is often online for independent contractors, agreements are crucial 😰. They lay out a clear set of terms to ensure transparency and a smooth work experience. This set of rules are outlined in a legally ⚖️ binding document called an independent contractor agreement.
If you’re an independent contractor (or you want to hire an independent contractor), here’s what you need to know to craft a great independent contractor agreement.
Before we get into the components of this agreement 🤝, let’s cover some basics: what an independent contractor is, what an independent contractor agreement is, and why you really do need one.
Independent Contractor vs. Employee
An independent contractor also referred to as a freelancer, is different from an employee in terms of the benefits and taxes. The client has no ❌ responsibility to pay for the freelancer’s withholding taxes or for benefits like health insurance and retirement accounts. Examples of independent contractors include lawyers 🧑⚖️, accountants 🧑💻, and other professionals 👨🏫 who provide services to a client.
Definition of Independent Contractor Agreement
Also known as the “1099 agreement,” this written ✍️ document clearly defines the terms and conditions of the work between the client and the contractor. This agreement 🤝 ensures that both parties are on the same page and that they understand the work arrangement. Furthermore, it draws the line between the benefits that an employee and an independent contractor are entitled to.
Importance of Having an Independent Contractor Agreement
You might be wondering what this agreement can do for your work relations with your client. There are three main reasons why it is crucial to have this kind of agreement:
- Provides Mutual protection
A contract provides protection 💪 to both the client and the contractor. For the former, the document serves as a reminder 📌 for the contractor not to divulge confidential information or imitate protected business ideas 🧠. On the other hand, the legitimacy of the agreement gives the contractor assurance that they will get paid.
- Lays the groundwork for a successful working relationship
It is hard to make a building without a foundation. Think of your independent contractor agreement as the foundation of your work relationship. This agreement outlines all the important details such as the scope, timeline, terms of payment, and obligations, that you’ll both need to know. This keeps everyone on the same page and ensures 👌 that everyone’s expectations are the same.
- Sets boundaries
An independent contractor agreement defines the relationship between the client and the contractor. Any situation that transgresses from the written contract ✍️ may qualify for a dispute. Setting the parameters and expectations provides both parties with a safety net as well as a guide to know when it is the right time to file for a dispute.
For example, let’s say your contract says you should get paid by a specific date. But your client misses the payment deadline, then refuses to communicate. You now have the contract as evidence that they did something wrong, which will make it easier for you to recover what you’re owed.
Must-Haves of an Independent Contractor Agreement
An independent contractor agreement doesn’t have to be complicated! In fact, there are downloadable templates spreading online and this may be enough, especially for small businesses. However, for large businesses with heavy demands, or for contracts with very specific and unique criteria, it is best for you to double-check 🧐 that your contract includes the following:
- Terms and Responsibilities
This section clearly defines the deliverables and details the specifics of the work, as well as the duration of the contract.
The length of the contract specifies the start and end of the working relationship. Although some projects do not have a concrete timetable, it is best to provide an estimate of the project’s completion.
- Terms of Payment
This is a crucial part of the contract, as it describes how much and when the contractor will get paid for the services you rendered. This should also include whether a down payment 💰 is required or if payment will be released once the work is accomplished.
You might also choose to include other sections in the agreement, such as but not limited to the following:
- Non-Disclosure Agreement
- Intellectual Property
- Non-Solicitation and Non-Compete Clause
- Grounds for Termination
- Arbitration Clause
Crafting the Perfect Independent Contractor Agreement
Now you know the basics of an independent contractor agreement, and you have seen the importance of having one. If you find yourself struggling to create one, or even if you just have further questions, do not hesitate to seek the guidance of a law professional. Book a consultation ✒️ with Ian Corzine or his legal team today!