In last week's Freedom Friday blog, I discussed how to determine the difference between hiring an employee and an independent contractor. If you have made the decision to hire an independent contractor, congratulations! That's just the first step in the process. Every independent contractor needs an agreement, especially if the independent contractor will be exposed to sensitive and/or confidential information.
When hiring an independent contractor, it is always a good idea to solidify your working relationship with the independent contractor in writing by using an independent contractor agreement. Here are eight key provisions which should be included in every independent contractor agreement:
1. Independent Contractor Status
The first key provision in any independent contractor agreement is declaring the status as an independent contractor. The agreement must be clear that the relationship between the parties is that of an independent contractor, and not an employer-employee relationship, a partnership, joint venture, etc. Further, the agreement should provide that the independent contractor will not be entitled to benefits, workers' compensation, or subject to tax withholding.
2. Services to be Performed
The second key provision in an independent contractor agreement is describing the services to be performed by the independent contractor. The independent contractor agreement should specifically describe the services which will be provided by the independent contractor. Further the agreement should provide any restrictions or requirements in how, where, and when the work will be peformed by the independent contractor.
The third key provision in an independent contractor agreement is compensation. The independent contractor agreement needs to specify whether the independent contractor will be paid based on an hourly or day rate, a lump sum once the work is completed, on a commission basis, or another arrangement. The independent contractor agreement should also specify when your business will pay the independent contractor for his or her work.
4. Time Period to Complete the Work
The fourth key provision in an independent contractor agreement is the time period to complete the work. The independent contractor agreement should include provisions for when the independent contract can start and finish the work, and if it's a long project, divide the work into phases with deadlines for each phase.
The fifth key provision in an independent contractor agreement is expenses. The independent contractor agreement should address whether the independent contractor or the business will pay for materials, equipment, mileage, and travel of the independent contractor.
6. Work for Hire Clause
The sixth key provision in an independent contractor agreement is a "work for hire" clause. The default rule is that anything an independent contractor develops, invents, creates, or makes is the property of the independent contractor. However, a "work for hire" clause would provide that any copyrights, titles, and interest arising from the work performed by the independent contractor in the course of your working relationship with him or her will be transferred to you. So, if you hire an independent contractor to create something with proprietary value, e.g. building your website or graphic design, then you should include a "work for hire" clause in your independent contractor agreement.
The seventh key provision in an independent contractor agreement is termination. The independent contractor agreement should provide how the agreement can be terminated, how much notice is required, how to handle outstanding work or payments, etc. The agreement should also specify how a dispute should be handled between the parties, including whether the parties must submit to mediation or arbitration instead of going to court.
Lastly, the eighth key provision in an independent contractor agreement is confidentiality, also known as the non-disclosure agreement. If the independent contractor will be exposed to sensitive or confidential information in the scope of his or her work, then the independent contractor agreement needs to have a non-disclosure provision. This part of the independent contractor agreement would legally require the independent contractor to keep confidential information secret, and not misuse such information without your express permission or consent.
Independent contractor agreements should be customized and drafted specifically for you, your business, and your unique situation and needs. As always, it is best to consult with an attorney who can help tailor an independent contractor agreement for you and your unique situation.
If you are interested in starting a small business anywhere in Oklahoma, or if you have a small business and you are looking to grow, please feel free to contact me at [email protected]. For more information about Liberty Legal Solutions, LLC, please visit our website http://www.libertylegalok.com.