Chapter 2: Contracts that Define Employment Relationships
Part 1: Examples of Employment Contracts
A: Independent Contractor Agreement / Freelance Contract
When you want to hire temporary help or an expert for a single project, you likely want to hire a freelancer (i.e., an independent contractor). These workers belong to the 1099 tax classification, which means they are in business for themselves. That also means you don't have to cover them with Workers' Compensation Insurance, pay part of their employment taxes, or offer other benefits.
However, your business can get in serious trouble if it misclassifies employees as independent contractors to save a few bucks. A freelance contract / independent contractor agreement can help keep you honest (and support your defense if the IRS audits you).
Here are some of the points a freelance contract includes:
- Services. Outline of the project at hand, due dates, and deliverables. Be sure to specify the contract term (e.g., whether the project is a one-time gig or ongoing work). Depending on the type of project, you may need to address which party has intellectual property rights.
- Fees and Payment. Pay rates, pay cycles, and billing procedures.
- Relationship of the Parties. Explicitly state that the party contracting with your company is an independent contractor. Even if the person you're dealing with is a seasoned freelancer, it helps everyone to explicitly state that they are classified as a 1099 worker and aren't entitled to employment benefits.
- Non-Disclosure. Explanation that your contractor must not share company secrets that they learned while working with your business. You may wish to use a separate NDA altogether.
- Indemnity. This clause needs to be written by a lawyer because the language has to be precise to stand up in court. It should state that the contractor will hold your business harmless for any injuries that arise from their negligence.
For more details, check out the independent contractor agreement template at RocketLawyer.com.
Next: Part 1B: Examples of Employment Contracts: Subcontractor Agreement