Many businesses engage independent contractors to perform work for them. Although these relationships can be beneficial, having independent contractors is not without risk. One way for a business to help protect itself is to enter agreements with its independent contractors. This article examines some of the benefits of using independent contractor agreements and identifies a few commonly included provisions. Any business with independent contractors should consult a business attorney for advice specific to the business’s unique situation and needs.
What is an independent contractor?
Broadly, an independent contractor is someone who performs services free from direction and control by the business for whom the independent contractor performs the services. Despite this broad definition, classifying individuals as independent contractors (versus employees) is actually very complex. Simply identifying someone as an independent contractor is not enough to ensure that the applicable government authority will treat that individual as an independent contractor and not an employee.
Part of the complexity lies in that the definition of an independent contractor varies depending on the statute or government agency involved. For example, federal, state, and local laws may define independent contractors differently. Further complicating classification, even different government agencies, such as the EEOC or the IRS, may employ different definitions. A business who improperly classifies an individual as an independent contractor when the individual is actually an employee risks exposing the business to potential liability for not withholding taxes and paying unemployment contributions, as well as other issues. Thus, anyone seeking to engage an independent contractor should consult an attorney to ensure that the individual is correctly classified.
Why Have an Independent Contractor Agreement?
There are many benefits to using an independent contractor agreement. Although not definitive, a well-drafted agreement may help a business establish to an investigating government agency that a particular individual is an independent contractor and not an employee. Another possible benefit involves protecting the business’s intellectual property by including provisions identifying ownership of intellectual property created in connection with the independent contractor relationship. Many businesses also include confidentiality provisions in their independent contractor agreements. Such provisions can prevent an independent contractor from disclosing a business’s trade secrets and other valuable non-public information. A business attorney can help identify which of these and other provisions to include in an independent contractor agreement based on a business’s unique needs.
Final Thoughts
Businesses seeking to engage independent contractors should consider using agreements to define the independent contractor relationship and protect the business’s intellectual property, confidential information, and other valuable aspects of the business. A business attorney can help a business protect itself by drafting an agreement that correctly defines the independent contractor relationship and includes provisions custom-tailored to the business’s unique needs.
For more information on this article or business law in general, please contact Albee Law PC at (312) 279-0115 or by email at info@albeelaw.com.
