One of the most important functions of an independent contractor agreement is to help establish that the worker is an IC, not your employee. The key to doing this is to make clear that the IC, not the hiring firm, has the right to control how the work will be performed.
You will need to emphasize the factors the IRS and other agencies consider in determining whether an IC controls how the work is done. (See The Common Law Test for information on these factors.)
When you draft your own agreement, include only those provisions that apply to your particular situation. The more that apply, the more likely the worker will be viewed as an IC.
Suggested Language
Independent Contractor Status
Contractor is an independent contractor, not Client’s employee. Contractor’s employees or contract personnel are not Client’s employees. Contractor and Client agree to the following rights consistent with an independent contractor relationship.
- Contractor has the right to perform services for others during the term of this Agreement.
- Contractor has the sole right to control and direct the means, manner and method by which the services required by this Agreement will be performed.
- Contractor has the right to perform the services required by this Agreement at any place, location or time.
- Contractor will furnish all equipment and materials used to provide the services required by this Agreement.
- Contractor has the right to hire assistants as subcontractors, or to use employees to provide the services required by this Agreement.
- The Contractor or Contractor’s employees or contract personnel shall perform the services required by this Agreement; Client shall not hire, supervise or pay any assistants to help Contractor.
- Neither Contractor nor Contractor’s employees or contract personnel shall receive any training from Client in the skills necessary to perform the services required by this Agreement.
- Client shall not require Contractor or Contractor’s employees or contract personnel to devote full time to performing the services required by this Agreement.
To obtain Safe Harbor protection from the IRS, you must have a reasonable basis for classifying the workers involved as ICs. One reasonable basis is that such classification is a longstanding practice of a significant segment of your trade or industry and that you relied on this longstanding practice in making your classification. (See Federal Taxes and the IRS Rules for more about Safe Harbor protection.)
If you are relying on industry practice, you should say so in your agreement.
Suggested Language
OPTIONAL: Contractor acknowledges that Contractor has been classified as an independent contractor because such classification is a longstanding practice of a significant segment of Client’s trade or industry.