Include These Provisions in Your Independent Contractor Agreements

Independent contractors can provide vital services to your business. But don’t be mistaken in thinking that just because a contractor is independent, no business contract is needed between your business and the contractor. There are many provisions that you may need to spell out in a contract with an independent contractor that you normally wouldn’t have to worry about with a contract between your business and a full time employee.

Is He or She Really a Contractor?

Anytime you have or use an independent contractor, you can bet that the state or federal taxing authorities and government agencies that put regulations and rules on employees but not contractors will check that your independent contractor is actually an independent contractor and not a full time employee.

Misclassification of workers, purposely or accidentally, does happen, and the government knows about it and looks for it. And there can be severe financial and legal penalties for making the error, even if it’s an accident.

Scope of Work

To avoid problems, your contractor agreement should set forth the scope of work and include details indicative of what an independent contractor does.

So, for example, if applicable, your agreement should say that the contractor is free to set his or her own hours, or that the contractor will supply his or her own materials, or that the contractor is free to work other jobs.

These are all hallmarks of independent contractors, but just because you and the contractor are on the same page, doesn’t make it true—put your understanding in writing so that if the contractor’s status is challenged later on, there’s documentation.

Intellectual Property Issues

When employees create intellectual property for you, the property is generally yours, under the work for hire doctrine.

But that isn’t always the case when contractors create intellectual property. You should always have documentation that says that whatever the creator makes or creates (which may include photography or writings) belongs to the company.

Similarly, if your contractor is using IP you want to make sure that you don’t get sued for the IP your contractor is using. He or she should agree to indemnify you if the contractor gets sued for violating someone else’s intellectual property.

Trade Secrets and Confidentiality

Contractors may have access to valuable information about your company—trade secrets, customer lists, or account information. It’s hard enough keeping employees from disseminating or misappropriating this information but it’s made even harder to keep contractors from using this information for their own benefit. Most contractors will agree to keep your information secret.

This also includes agreeing to return information that belongs to your company that the contractor may have, including emails, documents, or data, that you may have shared with the contractor.

What are the legal issues related to independent contractors? Let our West Palm Beach commercial litigation attorneys help you. Call Pike & Lustig today for help and advice.

Sources:

law.cornell.edu/wex/work_for_hire#:~:text=A%20work%20for%20hire%2C%20or,party%20rather%20than%20the%20creator.

irs.gov/businesses/small-businesses-self-employed/independent-contractor-self-employed-or-employee