Many businesses rely upon independent contractors to perform various tasks and complete projects. Although independent contractors are not employees, it is still essential that businesses enter into written agreements with them. These contracts, if properly drafted, will reduce the likelihood of misunderstandings and thereby protect the company’s rights.
What terms should be included in your independent contractor agreements? The New York business attorneys of Rosenbaum & Taylor are here to guide you and your organization.
What Type of Independent Contractor Agreement Does My Business Need?
There are various ways to draft the contract you will use with your independent contractors. A New York business law attorney can help you select from types as such the following.
Fixed price contract. This contract is used where an independent contractor is paid a lump sum for the work, rather than an hourly rate. These contracts are useful because they allow the company to know upfront what the total cost of the contractor’s work will be.
Time and materials contract. Independent contractors must often front the costs for materials and tools. A time and materials contract generally sets the amount to reimburse the contractor for such items plus an hourly rate.
Cost-plus contract. Under this agreement, the business and independent contractor set a fixed amount for the work. Also included are terms to reimburse the contractor for materials and tools used.
What Terms Should Be Included in a Contractor Agreement?
Every independent contractor agreement is different. The exact terms that will be used in yours depend upon the type of work to be done. Terms may also vary depending on your relationship with the contractor. An experienced New York business attorney can review your agreement with the contractor and reduce it to a written contract.
In general, these are some terms to consider using in your agreements:
- The scope of the work to be performed
- The method of payment (e.g. type of contract, as discussed above)
- Any confidentiality, trade secret, or non-disclosure protections the company needs
- Business liability and insurance
- Intellectual property rights
- Tax information (for example, clarifying that the business will not withhold taxes for the contractor)
- Which laws govern the contract
- Termination of the agreement
Whichever terms your company ultimately chooses, the objective is to minimize the likelihood of any disputes arising. When companies and contractors are on the same page, lawsuits are less likely to happen.
Be Sure You Don’t Misclassify Your Employees as Contractors
Although the independent contracting system is useful for businesses, it is often abused. That’s because independent contractors generally have fewer rights than employees. If your company misclassifies an employee as a contractor, you could expose yourself to significant liability. Work with a knowledgeable New York business law attorney to ensure your independent contractors really are contractors.
Courts will consider a number of factors to determine this, such as:
- The degree of control the company exercises over the work to be performed
- Who (the company or the purported contractor) supplies the tools to do the work
- How the contractor is paid
- Whether the contractor’s services line up with what the company does
- Whether the purported contractor assumes financial risk in doing the work
- The purported contractor’s relationship with the company and whether it’s more like traditional employment
Here to Help Your Business With Its Legal Needs
Do you use independent contractors in your business? Have you adopted written agreements to govern your relationship with them? If not, let the experienced New York business lawyers of Rosenbaum & Taylor counsel you. We can also review your existing contracts and help ensure you are not misclassifying your employees. Reach out to us today.