Employment & Independent Contractors

Employment & Independent Contractors

You may already know how important it is to properly classify your workers as either employees or independent contractors. Businesses and business owners that misclassify employees as independent contractors face substantial fines and penalties by the IRS and the Employment Development Department. You can learn more about the specific criteria used by the IRS to classify independent contractors by visiting: Employees versus Independent Contractor.

When your business engages an independent contractor to perform services on behalf of the business, the terms of the agreement with the IC should be detailed in a written independent contractor agreement. Typical independent contractor agreements include terms such as:

  • Identification of the Parties: Are you engaging an individual or a business?
  • Compensation: How much will the contractor be paid?  Is compensation based on hours worked, per project, or some other form of compensation?
  • Payment of Expenses: Are you required to reimburse the contractor for his/her/its expenses?
  • Term: Is the agreement for a fixed term or is it at-will?
  • Termination: How can the parties terminate the agreement?
  • Confidential Information: How will you protect confidential information?
  • Non-Competition: Are the parties prohibited from soliciting the other party’s customers?

In addition, any other terms that are material to the engagement, or are common in your business’ industry, should be included in the written independent contractor agreement. A written agreement will help lower the risk of future disputes regarding the terms of an independent contractor’s engagement and it can help minimize the cost of any disputes that do arise.

At Tailored Legal, our experienced business attorney can help you draft an independent contractor agreement that is customized for your business and your industry. Contact us today to schedule your an initial consultation for legal advice related to your business’ use of independent contractors.