The Independent Contractor Employment Agreement for US-based Work in a Nutshell
When taking on independent contractor jobs or hiring a freelance worker, there are always concerns that have to be addressed. The most mutually beneficial method to address these concerns and improve trust is by drafting and signing an “Independent Contractor Agreement.” For the sake of brevity, we’ll use the acronym “ICA” when referring to the agreement, where appropriate.
This contract agreement template is relatively universal across the country. However, regulations and contractual limitations may change or vary from state to state. Before customizing, otherwise altering, or signing, you should consult a contractor lawyer about the independent contractor agreement template.
What is an Independent Contractor Agreement?
First of all, there are more forms to think about than just the ICA itself. Typically, the entity (small business or enterprise) or individual hiring the contractor is generally the one responsible for preparing and distributing the agreement along with the 1099 tax form. You could say that the Independent Contractor Agreement is a kind of 1099 contractor agreement. While employees receive W2’s, independent contractors receive a 1099, typically 1099-NEC (formerly 1099-MISC).
For those wondering how to find or complete this form, here’s a sample 1099 (MISC and NEC) on the pdfFiller website (accessible to all US Legal Forms premium users). A sample can also be found with instructions on the IRS website. Now that we’ve discussed the proper tax forms for our 1099 contract, let’s move on to the contract’s contents, which will also help to explain why you need an independent contractor agreement.
The ICA is a document that typically outlines:
- The work to be performed
- Independent Contractor Status
- Representations of warranty of the contractor
- Miscellaneous provisions
Let’s discuss each of these components and why they’re essential in more detail.
Work to be Performed
The work to be performed section details when the work will start, and in some cases, when the work will end; however, the termination of the contract is typically detailed in the termination section. If the project has a set end date, it can be both. Also described here are the responsibilities of the independent contractor, under duties. The responsibilities usually include an understanding that the contractor must abide by the policies, regulations, and standards of the hiring party, which can be another document or series of documents that both parties sign. It also details that the contractor will meet the expectations set forth within the agreement, such as focusing their time and attention on the work being done.
This is all very important for protecting the hiring party. Everyone has heard stories of work taking far longer than anticipated or of work being artificially slowed.
This section protects the financial and accounting records of the hiring party and other details, such as the lists of property owned, amounts paid, client and customer lists, and additional information, including proprietary, which the business maintains.
It also ensures the return of documents and that the hiring party may hold an injunction in the event of a breach of this clause. This is incredibly important, as damages and losses cannot always be adequately assessed, which means that seeking reparations can also be problematic.
This section can be found in many sample independent contractor agreements.
This section of the agreement announces the independent contractor’s compensation for the work. It also details how taxation will be handled, whether or not the hiring party will be responsible for withholding income taxes, reporting taxes, the benefits available, and more. Whether or not the agreement is a 1099 contractor agreement can heavily impede the number of independent contractors willing to accept the work. Additionally, it also details the situation on compensation for expenses; this can include supplies, lodging, and more, depending on the specifics contained in the standard independent contractor agreement.
Termination at Will is a common subsection within a contract that allows the independent contractor to quit, provided the contractor gives a notice, which is often 14 days, as is the case in our sample contract for services. It’s the contractor’s right to be able to terminate the agreement.
The termination section may also outline that the agreement may self-terminate in the case of extenuating circumstances. One such example is the contractor’s death, wherein the salary promised will be paid to the contractor’s estate.
Independent Contractor Status
The Independent Contractor Status outlines an understanding that the contractor is not an employee or another status within the hiring party’s company. Remember, an independent contractor is not an “employee independent contractor.”
Representations of Warranty of Contractor
This section details that the contractor is not under contractual or other employment obligations, preventing them from signing the contract for independent contractors. In some cases, contracts can contain an anti-competition clause. Without this section of the agreement, there may be legal repercussions faced by both the hiring party and the independent contractor.
Miscellaneous Provisions can contain a wide array of clauses and subsections. We’ll focus on what’s within our contractor contract template to keep it simple.
A critical topic of note within the agreement is that some terms must be upheld, even after the termination of the contract. Some details, such as confidentiality, must persevere after the contract’s duration to protect the hiring party; and termination and compensation upon death to protect the contractor.
The agreement should also supersede previous arrangements made verbally or via email; this protects both parties so that everyone knows what they’re in for. And, it should always be mentioned that whoever defaults on the agreement should “within reason” reimburse the non-defaulting party. This is just as important to the contractor as it is to the hiring party; the hiring party may terminate their deal after the contractor has ordered and paid for supplies, subcontractors, and more.
Additionally, the state in which the contractor contract has been signed should be mentioned, along with mentioning that everything shall be in accordance with state laws. This includes safety, permits, and more.
Common Questions and Answers
How to Write an Independent Contractor Agreement
Luckily, due to the templates made available, you don’t have to. However, it’s recommended to modify the template to your exact needs. This should be done with the consultation of a lawyer before signing the agreement; this is to ensure that you comply with local, state, and federal law.
How to Fill out an Independent Contractor Agreement
Filling out the document is pretty simple; you can either print it out and physically sign the agreement or edit and sign it online. Here’s a blog that’ll help you get started with editing your document utilizing the pdfFiller integration for US Legal Forms.
What If You Don’t Have an Independent Contractor Agreement?
If you’ve already started the work and only have verbal or email arrangements, this can cause you, and any employees of yours, a lot of trouble.
From the standpoint of the hiring party, you may find the contractor isn’t delivering performance services in a timely manner or that they’re leaking confidential materials. Both of which can be very unprofitable and bad for business.
From the standpoint of the contractor, you may find your compensation, benefits, and even ability to terminate your arrangements are now severely complex. According to several surveys, many contractors spend most of their time seeking payment for work already completed; this is time wasted. Time is money when your income is directly proportional to your ability to focus on seeking new clientele.
What Forms Should You Use for Subcontractors?
While this may vary from state to state, we do have a standard subcontractor agreement template. This template is multi-state; however, it is recommended that you consult with a lawyer before signing.
This agreement may also be used as a construction contract template with modifications to ensure the safety of the personnel involved. However, an independent contractor is not an employee, and this agreement should not be confused with an employment contract template. One can be found in any of US Legal Forms’s state-specific Employment Hiring Process Packages.
In business, written agreements ensure that everyone is fully aware of the boundaries of the arrangement, that the work is completed, and that both parties have legal protections at their disposal should the need arise. Without binding contracts, the world would be challenging to do business in; luckily, it doesn’t have to be.
US Legal Forms has been helping users find suitable forms for any legal or business situation since 1997, a true pioneer in legal online document management. With the premium subscription, users can also edit, eSign, and notarize online.