In the U.S. and many parts of the world, independent contractors are having a new heyday. This surge in hiring independent contractors (freelancers) can be attributed to the changing gig economy🤑 and advancements in technology. Employers can hire a freelancer or an independent contractor for services like:
- Graphic design
- Content writing✍
- Software development and many more
These individuals work on a part-time basis and have an independent contractor status. In California, an independent contractor agreement binds📎 clients to independent contractors. What is a California independent contractor agreement form exactly, and what does it contain? Whether you’re a freelancer, an employer, or both, read on to gain a deeper understanding!
What Is California Independent Contractor Agreement Form?
A California independent contractor agreement form is a formal document. It outlines the working relationship between a contractor or freelancer and a hiring company or client. In a California independent contractor agreement form, the employer needs to specify the type of project, its duration⏱, and the deliverables as well as the number of gig workers you’ve contracted.
Some of the contents of an independent contractor agreement form include:
- Work deliverables
- Scope of the task
- Financial compensation
An independent contractor agreement also clarifies that the independent contractor won’t receive the following applicable insurance policies often afforded to employees 👇:
- Insurance coverage
- Compensation insurance
- Health insurance
- Unemployment compensation or unemployment insurance
The Purpose of a California Independent Contractor Agreement Form
Whether you’re a contractor or a company hiring independent workers, you often need to file a contractor agreement to fulfill all legal requirements for this type of work. Here are two compelling agreements to craft an excellent independent contractor form.
Sets the Tone for a Good Working Relationship
This form acts as a legally binding agreement and builds the foundation for a good employer-employee relationship, which is good for everyone involved! It outlines how the contract adheres to employment law and seeks to manage client expectations and reduce any misunderstandings 🤔.
This document also ensures that you receive the services requested and the independent worker gets paid 💵 as agreed. It helps both parties avoid job-related, legal, or material conflicts 🗣. In such cases, you need to file this form to protect the business interests of both parties.
When hiring independent workers, you legally need an agreement form for record-keeping and filing income taxes for your business entity. An independent contractor contract provides proof to the IRS that you hire independent or freelance workers per California labor laws. This even applies when hiring international freelancers to work for your company if they’re making over a certain monetary threshold.
This agreement form also comes in handy for tax purposes and during Internal Revenues Service (IRS) audits. In addition to this form, you may need to file other forms for contractor/employer relationships, including:
For freelancers, whether you’re acting as a sole proprietor, limited liability company, or other business owners, an independent contractor agreement can serve a similar service. It can also help you keep your records in order and whether an audit with as little damage as possible.
The Contents of a California Independent Contractor Agreement Form
To ensure you create a quality agreement form to govern the relationship between independent or freelance workers and a company, you’ve got to ensure that you meet all initial requirements. Such additional requirements may include AB-5 requirements and reporting requirements. A typical contractor agreement form should consist of the following elements 👇.
Client and Service Provider Information
At the introduction part of the agreement form, provide relevant information about the hiring company and the freelancer providing the actual services. Specify the legal names and valid addresses of both parties. The independent contractor must also specify their employee status. You may also need to provide a business registration number. In case of a breach of contract, the contractor information can provide an easy way to seek legal assistance from employment attorneys.
Scope of the Work
The agreement between contractor and client should outline every detail of the project. Here’s a quick rundown:
- Time frame
- Product, service, and task under procurement
- Deliverables, including a full list of services expected from the freelance worker
- The nature of your independent contractor relationship
- Exit clause
- Any additional items as agreed upon between the two parties, such as rest breaks, time of termination, and the like.
Being detailed about the scope of work can minimize misunderstandings regarding work deliverables that may develop later between the client and the independent contractor. The employment relationship should always be crystal clear for both parties.
Compensations Rates for the Services🤑
Outline the nature of your compensation agreement with the independent contractor. This includes the rate of compensation and whether overtime compensation exists. Apart from indicating the agreed amount of payment, you need to also outline the payment frequency and whether it will happen in installments.
If the method of payment necessitates the achievement of certain milestones, you need to indicate this. You also need to provide the payment details for the independent contractor, including their payroll taxes. The clearer you can be on financial matters, the less chance of conflict you’ll incur later.
Benefits and Liability Exclusion
If you’re an employer, you need to state to the independent contractor that they won’t receive any employee benefits allocated to actual full-time employees due to their independent status. With regards to employment benefits exclusion, a business should indicate that the freelancer won’t receive a social security payment, vacation pay, financial services, worker’s compensation, or pension. Independent contractor laws don’t give provisions for such allowances. The document needs to also indicate that the independent contractor will have the responsibility of paying their taxes and other expenses on their own 😎.
A Note on Independent Contractor Agreements and Noncompete Clauses
The independent contractor status leaves the contractor with many personal responsibilities, but it also stipulates certain freedoms. Since independent contractors often work remotely, they can sometimes avoid supervision or restriction from working with other clients or engaging in a joint venture (as stipulated in a non-compete agreement). Federal labor laws grant them the mandate to work with several clients. Therefore, if you’re a contractor and you run into any issues regarding this with a client, a legal expert or even the superior court may step in and provide the necessary guidance to your employer.
Filling Out Your California Independent Contractor Agreement Form
Developing contractor agreements may seem a tiresome process. However, it comes with employment benefits well worth the additional time. Having an in-depth understanding of California labor rules and regulations will enable you to create good contractor agreement forms. If you’d rather leave that to the experts, check out our independent contract agreement template (it’s customizable!).
Don’t underestimate what an experienced internet attorney like Ian Corzine can do for you. An attorney can guide both the business and your independent contractor on how to fill an independent contractor agreement form 📋 in California. Ultimately, paying a little now can protect both parties involved and save serious business expenses or raising premiums on a policy of insurance down the line.
Book✍ an appointment today with Ian or his legal team or use the template linked above to get started. We will take care👍 of all your independent contractor agreement form requests and more!