Free Enterprise - The FindLaw Small Business Law Blog

Independent Contractor Agreements: Top 5 Things They Can Do for You

With more businesses needing to employ independent contractors versus full-time employees, the all important line between employee and contractor has been in the news again this tax season. One way to clarify matters and avoid misclassifying an employee: an independent contractor agreement.

As discussed in this blog post, getting the contractor vs. employee distinction wrong can have dire consequences. The best way to get it right is to do so from the beginning.

One highly advised way to do this is to put an independent contractor agreement in place. Here are five key things an independent contractor agreement can do to help you.

  1. Clearly state that the worker and you agree regarding their status as an independent contractor. One key benefit to having a contractor agreement is to help ensure that the worker does not cross the all important line between contractor and employee.
  2. Specify the work to be performed, along with the rate to be paid and details about how and when payment will be made.
  3. Specify who will pay expenses and provide supplies. (Typically, expense and supplies are provided by the independent contractor.)
  4. Specify that the independent contractor in fact has any necessary licenses or permits, and has their own liability insurance.
  5. Clarify how the agreement may be terminated and specify how any disputes will be resolved (in arbitration for example).

As with the wide variety of work an independent contractor can perform, the agreement can be shaped to your needs. In coming up with the details, keep in mind the hallmarks of an employee versus a contractor.