If your business is audited, an auditor will first ask to see your agreements with all workers you’ve classified as independent contractors. A well-drafted agreement that indicates that the IC is in business for himself or herself will help make clear to the auditor that the worker is an independent contractor. The document will help demonstrate that you and the worker intended to create an independent contractor relationship. And because written agreements with ICs have become a routine fact of business life, if you don’t have one, you will immediately look suspect.
However, a written IC agreement is not a magic legal bullet. It will never by itself make a worker an IC. What really counts is the substance of how you treat a worker. If the agreement is accurate when it says the worker is in business, that will be helpful. But it won’t help a bit if, in reality, you treat the worker like an employee.
EXAMPLE: AcmeSoft, Inc., hires Pat to perform computer programming. It requires her to sign a document called an Independent Contractor Agreement. The agreement states that Pat is an IC and that AcmeSoft will exercise no control over Pat on the job. However, in reality Pat is treated just like an AcmeSoft employee: her work is closely supervised, she is paid bi-weekly, she has set hours of work and she works only for AcmeSoft. Pat is an AcmeSoft employee, despite what the agreement says.