Legal Information for Entrepreneurs
Independent Contractor Contract Agreements
Independent contractor agreements are a necessity if you use independent contractors. In fact, failure to have a contractor sign an independent contractor contract might ultimately be used against you in recategorizing the independent contractor as an employee. Plus, there are many other issues you need to protect yourself against.
Sooner or later your business is going to employ the services of an independent contractor.
When you do it's important to make sure you business is protected, and the way to protect your business is through the contract. Every contract you sign with an independent contractor needs to include some essential details, including these . . .
Right off the bat, your contract with an independent contractor needs to specify the services that will be performed. The more detailed you are in describing the services you expect the contractor to perform, the more protected your company will be in the event that your relationship ends badly. For example, "accounting services" is not nearly as effective as "completion of the 2006 earnings statement".
How long will it take to complete the project? The contract should specify the start date, completion date, penalties for late completion, and bonuses (if any) for early completion.
The contract should also discuss how much is to be paid for the service, how it will be paid, and when it is due. Progress payments are not uncommon, but make sure the contract allows you to review the work prior to rendering payment for it.
Some projects assigned to independent contractors are easier to monitor than others. In any case, the contract should stipulate how often the contractor is required to report on his progress, as well as who he will report his progress to.
It's possible that independent contractors may have access to information or processes that are considered to be proprietary secrets. If there is no way to avoid giving them access to confidential information, the contract should require them to agree to maintain confidentiality and prohibit them with sharing that information with anyone outside the company.
Work for Hire
Your contract should make it clear that the contractor's work is considered to be work-for-hire. This is especially important for contractors involved in creative materials or anything else that can be copyrighted because a work-for-hire clause is your assurance that the end result of the contractor's labor stays with the company instead of remaining with the contractor.
Is the contractor offering any warranties on his work? If he is, they had better be described in the contract. Even the most convincing verbal agreement can't stand up to the cold, hard facts of a well-crafted contract.
Contractors often employ sub-contractors to help them complete their contract obligations in a timely manner. However, your contract should provide you approval authority over sub-contractors before they have been signed for the job.
Share this article
Additional Resources for Entrepreneurs