Independent-ContractorIndependent Contractor Agreement Drafting & Development

Many businesses, especially in the start-up phase, believe that hiring a independent contractor instead of employees can have many economic advantages. The belief is there are savings on unemployment and workers’ compensation premiums and other payroll taxes, as well as savings on benefits available only to employees such as overtime, health coverage, and insurance.  This may be true but misclassifying individuals working for the business as independent contracts can have detrimental consequences for the business.

Simply stated, an independent contractor is a person or business entity hired to provide a specific service or product, but not hired to work as an employee.  This person or entity would normally contract with a business to perform a piece of work or provide a specific good according to his or her own methods and is subject to the contracting businesses control only as to the final result of his or her work or end product.

The distinction between employees and independent contractors has significance for the contracting businesses liability exposure arising from the actions of the individual or business entity employed, as well as liability for a range of employment benefits and expenses.  Thus, it is of significant importance to a contracting business to make clear whether an individual is an independent contractor or an employee so as to not misclassify the business relationship.

When a South Carolina small business or start-up determines that it is in its benefit to use an independent contractor, our Charleston business law firm will help analyze the relationship and work to implement a proper business relationship structure that will closely match the regulatory agencies’ criteria for independent contractors.

In simple terms an independent contractor agreement sets out the terms of the relationship between a hiring party and a contractor. Moreover, it helps establish a worker’s status as independent contractor because it acts as evidence of an independent contractor/hiring party relationship, rather than an employee/employer relationship.

The following terms are essential in independent contractor agreements:

  • Description of the independent contractor’s duties and the services the parties have agreed he or she will perform
  • Description of how, when, and how much the hiring party will pay the independent contractor
  • Description of which party will be responsible for expenses and who which will provide materials, equipment, office space, etc.
  • A statement establishing the independent contractor has liability insurance
  • A statement establishing the term the independent contractor will work (for instance, three weeks, one season, or until the job is done)
  • A statement establishing under what circumstances the independent contractor can terminate the agreement
  • Description of how the parties will resolve a dispute if one arises
  • A statement establishing that both parties have agreed to an independent contractor relationship
  • A statement establishing that the independent contractor has all of the permits and licenses required by the state to perform the specific work
  • A statement that the independent contractor will pay taxes
  • A statement establishing that the independence contractor is not entitled to receive benefits from the hiring party