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Independent Contractor Agreement: A Contract for the Non-Employee

There are certain provisions in a independent contractor agreement that are particular to it compared to an employee agreement. Here are a few sections that you can take a quick look to see if your agreement contains these provisions.

Independent Contractor Status

There are usually at least one or two provisions which make both general and specific statements to support that the employer is engaging the other party as an independent contractor and not an employee. As discussed in another blog post, merely calling someone an independent contractor, does not make it so, but it can help. Some of the ways contract provisions lay this out is by specifically describing the party as being an “independent contractor” who is “engaged in an independent calling and has complied with all local, state, and federal laws regarding business permits and licenses that may be required to carry out the independent calling and to perform the services to be performed.”

Agreements often also discuss taxes in that the independent contractor “agrees that it is the independent contractor’s exclusive responsibility to provide all employment taxes, insurance premiums, and local, state, and federal taxes” and neither FICA (Social Security), FUTA (Federal Employment), nor local, state, or federal income taxes will be withheld from payments.”

These two provisions give support of the party’s independent contractor status.

Indemnification

Indemnification is usually very important since independent contractors, by its definition, are independent and usually solely responsible and liable for its own actions. This is the opposite assumption when it comes to employees, where employers are usually vicariously liable for the acts of their employees within their scope of employment.

If an independent contractor were to cause harm to a third party, that third party may still seek to extend liability to the employer even if the employer legally should not be held liable. It is in this case in which employer would want independent contractor to indemnify the employer. If the independent contractor is in the best interest to prevent the harm to occur, it is often prudent to contractually obligate the contractor in reimbursing losses and even providing funds to actually defend in the event the employer is also sued along side the contractor.

Scope of Work

Scope of work is useful in any service agreement, but is particular to a contractor agreement because usually fees are based upon work performed, whereas an employment agreement is usually based on time worked. Well written scope of work sections that take into account contingencies, will give clear expectations of the parties reducing the risk of disputes.

 

Nasir Pasha, Esq.

Post by:

Managing attorney and co-host of podcast Legally Sound | Smart Business

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