An independent contractor agreement is an important part of an independent contractor’s business. It is commonly signed upon starting a job and contains all the particulars of the working arrangement. Who uses these?
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The people who use an independent contractor agreement are those making working arrangements with freelances, contractors, or consultants. Businesses who hire these workers want to have the arrangement in writing through a contract.
Why is it Important that the Contract is in Writing?
Many projects where someone hires an independent contractor are not required by law to have anything in writing. An oral contract can be legally binding. However, it is much better to have the agreement in writing. There are too many times when misunderstandings occur and there is nothing in writing to refer to. A written agreement will be clear as to what the payment agreement is and what everyone will do if a dispute arises. If a dispute goes to court and the agreement isn’t in writing, it will be one person’s word against another. The safe way is to have a document that sets out all the details of the working relationship.
Tax Reasons to Have a Written Independent Contractor Agreement
The IRS and other agencies need to be able to see what the relationship is between both parties. The rules are quite different regarding a hiring firm and an independent contractor as compared to an employer and employee relationship.
Terms to Include in the Written Independent Contractor Agreement
There are terms that should be included in the agreement. Some of them are:
- A description of services to perform
- How the independent contractor will be paid
- Who pays expenses
- Who provides equipment, office space, and materials
- A statement that the state and federal income taxes are paid by the independent contractor
- A statement that the independent contractor knows he or she isn’t entitled to benefits
- The independent contractor carries his or her own liability insurance
What is an Independent Contractor?
So, what is an independent contractor? An independent contractor is also known as a freelancer and is normally self-employed. He commonly has more than one customer, invoicing those who he does work for. Other characteristics of an independent contractor are:
- Has his own equipment or tools
- Has signed what is known as an independent contractor agreement
- Works on fixed terms
- Can hire subcontractors to help him
- Does not get general employment benefits as employees do
An Independent Contractor Agreement
This agreement is a written contract. It lays out the terms of the working arrangement between the person hiring and the freelancer. The person who hires the independent contractor will put in terms, usually, that prevent the contractor from divulging information about the business. Terms will likely also be included that make agreements regarding non-competition and non-solicitation. These are included when the industry the independent contractor is engaged in could be affected by competition and the like. Other items that will likely be included in an independent contractor agreement are:
- Length of the service or project
- Terms related to the service or project
- Description of services to be provided
- Billing details as well as deposits and retainers
Some other names for an independent contractor agreement are:
- Consulting agreement
- Freelance contract
- General contractor agreement
- Consulting services agreement
Those Who Use an Independent Contractor Agreement
The people who use this type of agreement include consultants, freelancers, contactors and any businesses who want to have an outline of a service arrangement with a written contract.
When an independent contractor is going to sign a contract for a job, it is in his or her interest to have it thoroughly reviewed by a contract attorney. It doesn’t take too long to accomplish a complete review, and at the end, you will have confidence in signing such an agreement.
Why Should Businesses Classify Workers Properly?
So, why should a business classify workers properly? There are a number of concerns regarding the classification of workers. A couple of these are employment laws and taxes. But there are others. When unsure as to whether or not a worker should be classified as an independent contractor or an employee, it’s vital to do your research to know how to proceed.
It is Vital to Classify Workers Properly
Employment laws are the most important reason to properly classify workers in a business or company. Many of the laws only cover those who are employees, so by misclassifying workers, those non-employees suffer as they are not protected by those laws. The employer can also face penalties. For example there is the Fair Labor Standards Act. This law requires that overtime is paid and employers must pay minimum wage. If some worker is said to be an intern or an independent contractor instead of an employee, he is not protected by those requirements and the employer can face violations under that act if that worker is indeed an employee.
The Point of Workers’ Compensation
In many states, workers’ compensation provides medical care and compensation to those employees who are injured on the job. If a worker is classified as an independent contractor and was injured on the job, he would not receive medical assistance. In cases such as this, the employer would really be in trouble if the person was misclassified.
Other Independent Contractor Requirements
Certain forms need to be filled out under the Immigration Reform and Control Act. This law is required so there is documentation for someone to work legally in the United States. For those employers who have classified workers wrongly as independent contractors, they will face violations under that act and also for possibly hiring and employing individuals who aren’t eligible to work in the U.S.
When an employer has wrongly classified workers as independent contractors, he or she could end up being sued by the workers. They will have been denied benefits and other compensation when misclassified. These civil lawsuits can be trouble for any business. And of course, IRS rules must be complied with, and employers need to pay payroll taxes. If misclassifying workers, penalties could be levied.
Independent Contractor Agreement Lawyer
When dental contracts are reviewed by an experienced attorney, you will find great financial benefits which end up outweighing the cost of the contract’s review. If you are in need of assistance with a dental employment agreement or dentistry contract review schedule an Independent Contractor Agreement Review with Chelle Law today!