Businesses have employees but also hire independent contractors, frequently or from time to time for various reasons. What is an independent contractor? An independent contractor is a non-employee worker not under company employment terms. This means that workers represent potential liability when proper contract terms are not established to define the scope of the relationship between a business and the independent contractors they hire.
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What Is an Independent Contractor?
An independent contractor is a worker who is not considered an employee at the time they are performing certain work. For example, a business might hire a computer technician to work at their office instead of hiring an in-house employee or developing an in-house IT team. Independent contractors do not have employee benefits, nor are they covered by workers’ compensation, wage, and overtime laws. They are, in a very real sense, independent businesses themselves, performing limited-scope work.
Protecting Your Business with a Contractor Employment Agreement
Businesses are in a good position to protect themselves from problems that may arise in relationships with independent contractors. In every case, an experienced business attorney should be consulted when developing contracts. A lawyer will ensure that all bases are covered and all legal requirements have been met. Below are some of the key provisions and issues they will address.
Identify the Parties and Nature of Work
Every independent worker contract should identify the full legal name and title of every party involved. Nicknames and aliases should not be used when they are not the legal name of the party entering into the contract. The type of work should also be identified and described in sufficient detail so as to ensure clarity in work duties.
Establish Independent Contractor Status
The agreement should also expressly establish the worker as an independent contractor and not an employee. Employee rights may accrue if this step is not handled correctly. Your attorney will use specific language to prevent this from occurring.
Scope of Work and Deliverables
The scope of work refers to the “how much” or “how many” of work relationships. It also defines the duties of the parties. Airtight contractor agreements will have precise numbers in many cases and specific times and dates for the delivery of goods or execution of services.
At Weisblatt Law Firm, your business interests are our prime concern. We help make sure you are protected when you do business.
Payment and Expenses
No contract is valid without an exchange of consideration regarding expenses and payment. What will the independent contractor get for their efforts? A contractor agreement should cover all financial arrangements between worker and business, including:
- Amount of payment
- Payment timelines
- Identification of payees.
The issue of expenses should also be addressed in contractor agreements. Certain work agreements might result in various costs that are collateral to the work being done. Determining who should pay for them before a problem arises is always optimal.
Intellectual Property Ownership
Many types of work involving independent contractors yield new and valuable intellectual property. Consequently, the question of who owns said property often arises. The answer, fortunately, can be determined beforehand. A contractor agreement can assign ownership of intellectual property to parties based on the nature of the agreement. In one case, a business owner may allow an independent contractor IP ownership rights; in another, the owner might deny them.
Confidentiality and Non-Compete
Many businesses expose their “secret sauce” when they work with independent contractors. Non-disclosure agreements are an effective way to keep independent contractors from communicating confidential information. Non-compete clauses may also be a powerful tool but must be drafted carefully so as not to overly restrict a worker’s future employment or commercial endeavors.
Termination and Dispute Resolution
When and how a party may terminate the agreement must be exhaustively covered in the terms of the contract. This will set contractual, bright-line boundaries that determine when a breach has occurred.
Contractor agreements should also contain conflict resolution terms and guidelines, which allow parties to determine the venue for settling any disputes that arise. In many cases, it is more favorable for businesses to include terms requiring the use of alternative dispute resolution measures than allowing disputes to go to trial.
A Business Lawyer Can Protect Your Enterprise
Ultimately, it is through the service of an experienced business lawyer that Houston-area businesses find the protection they need when working with independent contractors. An investment in legal services can save a business from significant liability down the line.
To speak with an experienced Houston business lawyer, contact Weisblatt Law Firm. We’ll protect your interests through quality legal services and drafting. Call (713) 666-1981 today.
Attorney Andrew Weisblatt
Mr. Weisblatt has practiced continuously since becoming licensed in 1992 and has represented businesses ranging in size from one person start-up ventures to multi-national corporations employing hundreds of people in multiple countries. From 2005 through 2009 Mr. Weisblatt was in-house counsel and chief operating officer of a multi-national corporation in the steel products industry. That in-house position provided valuable insight into how businesses work and what they actually need from their lawyers – both in-house and outside counsel. Attorney Bio
