Having written agreements in place are essential when doing business with, or as, an independent contractor. While the law does not require a written independent contractor agreement, and an oral agreement on terms would suffice, not having a written agreement often leads to misunderstandings. Misunderstandings lead to delays and hostility. Misunderstandings may be simply innocent: the parties understood the deal differently; or may also be intentional: one party is looking to take advantage of a situation. A written independent contractor agreement, on the other hand, avoids confusion. A written agreement of this sort establishes what the contractor has agreed to do and how much the hiring party has agreed to pay. An independent contractor agreement states what the two parties will do if a dispute does arise. Written independent contractor agreements avoid against situations where the hiring party’s word goes against the independent contractor’s word. It is a safeguard against these types of situations that may result in costly commercial litigation or delays.
In simple terms an independent contractor agreement sets out the terms of the relationship between a hiring party and a contractor. Moreover, they help establish a worker’s status as independent contractor because it acts as evidence of an independent contractor/hiring party relationship, rather than an employee/employer relationship.
The following terms are essential in independent contractor agreements:
- Description of the independent contractor’s duties and the services the parties have agreed he or she will perform
- Description of how, when, and how much the hiring party will pay the independent contractor (for example, will the IC be paid with a fixed fee for the finished project; an amount based on time; or an amount based on the achievement of benchmarks?)
- Description of which party will be responsible for expenses and who which will provide materials, equipment, office space, etc.
- A statement that established that both parties have agreed to an independent contractor relationship
- A statement establishing that the independent contractor has all of the permits and licenses required by the state to perform the specific work
- A statement that the independent contractor will pay taxes
- A statement establishing that the independence contractor is not entitled to receive benefits from the hiring party
- A statement establishing the IC has liability insurance
- A statement establishing the term the independent contractor will work (for instance, three weeks, one season, or until the job is done)
- A statement establishing under what circumstances the independent contractor can terminate the agreement
- Description of how the parties will resolve a dispute if one arises
Other terms that are important in these type pf agreements include how to treat intellectual property and which party will be responsible for the employee’s hired by the independent contractor.