What’s the Point of an Independent Contractor Agreement?

As an independent contractor, there’s no greater joy 🤗 than starting to work on an exciting new project. Of course, you and the client have already agreed on all terms and crafted ✍ an independent contractor agreement document for your business arrangement—right?

It can be tempting for self-employed individuals and contract workers to skip the legal contract and go right to work. But relying on a verbal agreement can lead to serious issues later! In this article, we’ll show you the purpose of an independent contractor agreement form and divulge how you can get one.

What Is an Independent Contractor Agreement?

An independent contractor agreement is a binding document 📁 that specifies the existing business relationship between a hiring company and a contractor. As a form of a legal contract, the agreement is supposed to benefit both the business owner and contract workers. It should:

  • Define clear expectations of the working relationship
  • Outline the criteria for termination of contract
  • Protect both parties 👥
  • Reduce chances of employment misclassification for freelance contracts.

The independent contractor agreement is different from an employment contract. It provides details about the services and projects a worker 👷 undertakes that have company benefits in mind. For instance, if a company hires a freelance graphic designer for their website, their contractor agreement specifies the required deliverables and their deadline ⏰.  

Why Bother with this Agreement?

Okay, it’s not a legal requirement for a business or hiring company to have a contract agreement with an independent contractor 😎. However, these contracts have become a common practice in the recent past 👌 for contracted services. Having an independent contractor agreement in place can help smooth things over in the following areas.

Clarify the contractor’s and the client’s obligations. An independent contractor agreement helps to outline the contractor’s obligation to the client and vice versa 💪. It helps to outline the services the contractor needs to perform and the contractor payments 💸 they should receive from the client. This can prevent 

Reduce chances of employee misclassification. This document helps clarify that the hired individual works as an independent worker and not an employee 🏌. The indemnification clause prevents the hiring company from mistakenly 😛 listing the hired individual as their employee. This is a serious matter! Employee misclassification could lead to legal action by:

  • Labor regulators
  • Tax authorities
  • The misclassified employee themselves 🤓

Help in tax department audits and inquiries. Social security, withholding federal taxes, and payroll taxes for a (full-time) employee is far different than the scant requirements for a contractor. An independent contractor agreement assures tax officials that both parties comply 🤙 with federal income tax, social security taxes, and other related responsibilities.

What Are the 4 Must-Haves in an Independent Contractor Agreement?

When crafting 📝 your independent contractor agreement document, be sure to cover the following 4 basic terms! Remember, doing this right can help both the business owner and the person completing the contracted services. It can even reduce the chances of legal action! 

1. The independent contractor relationship

Any independent contractor contract needs to specify that the chosen person has an independent contractor status and not as an employee of the hiring company 👏. As such, they won’t receive any health insurance coverage or employee benefits meant a full-time employee. They also won’t be required to show up for a certain shift or work permanently for the company as an employee. 

2. The expected scope of the work

A typical agreement must outline the client’s expectations 🗣 of the contract employees. It seeks to answer simple questions like what the contractor will deliver in exchange for payment. The scope of work may vary according to the complexity of the project at hand. A well-defined scope helps in minimizing any breach of contract or contract disputes. 

3. The work timeline

When crafting a confidentiality clause with a client, you must ensure they specify reasonable times for completion of services. Specify the delivery dates 📅 to the client so everyone is on the same page; will you deliver on a weekly basis or just once, for instance? You can also include how you’ll deliver the work (e.g. from the contractor via email). 

4. The terms of payment

Outline the expected dates or payment schedule of payment for the work done. You can agree to receive proper payment or additional compensation at the end of every month 🗓 or after a fixed period says 20 or 30 days. You can also determine the payment method (paying a freelance worker in cash or sending a check to their mailing address, for example).

Other Sections of the Contract

A freelancer contract agreement may also include other sections depending on the business situation. These can include the following clauses to solidify the independent contractor-client relationship. 

  • A non-solicitation clause. This makes it so no one can go after the other’s client list, including recording the active email address or primary email address
  • A non-compete clause (keep in mind that these are not valid in some states)
  • A confidentiality clause to keep company secrets safe and the sole property of the owner. 
  • A section outlining intellectual property rights of both parties.
  • An arbitration provision stipulating arbitration agreements in lieu of going to court. This is a more informal resolution process with fewer costs than a legal process.

Ask for Help with an Independent Contractor Agreement

If you need further consultation with an independent contractor agreement, we can help you 😇. With our great team of social media attorneys 🤵, we can answer all your questions and help you hone your entire agreement.

To get started, just book a consultation with us 👉 here. You can also purchase 💰 our customized independent contractor agreement template here. With our help, you can create a contractual relationship that benefits everyone involved so your business can truly thrive!