The circumstances under which you may terminate the agreement are important. You should not retain the right to fire or terminate an IC for any reason or no reason at all as you would with an employee under the generally prevailing employment-at-will doctrine. This type of unfettered termination right strongly indicates an employment relationship. (See The Need for a Legal Test to Determine Worker Statu for more about characteristics that make a worker an IC.) Instead, you should be able to terminate the agreement only if you have a reasonable cause to do so.
a. Termination for reasonable cause
You should have the limited right to terminate the IC only if you have a reasonable cause to do so. There are two types of reasonable cause. The first is a serious violation of the agreement by the IC. It would include, for example, the IC’s failure to produce results or meet the deadline specified in the agreement.
You can also terminate the agreement if the IC does something to expose you to liability for personal injury or property damage—for example, if the IC’s negligence injures your employees, damages your property or damages someone else’s property. You don’t have to terminate the agreement if this happens, but you have the option of doing so. You may not want to continue dealing with an IC who is extremely careless.
If you fire an IC who performs adequately and otherwise satisfies the terms of the agreement, you’ll be liable to him or her for breaking the agreement. The IC can sue you in court and obtain a judgment against you for money damages.
Suggested Language: Alternative A
Terminating the Agreement
With reasonable cause, either Client or Contractor may terminate this Agreement, effective immediately upon giving written notice.
Reasonable cause includes:
a material violation of this Agreement, or
any act exposing the other party to liability to others for personal injury or property damage.
b. Termination with notice
If you just can’t live with a restricted termination right, your best approach is to add a provision giving you the right to terminate the agreement for any reason upon written notice. The notice term can be anywhere from a few days to 30 days or more, depending upon the length of the contract term. The longer the term, the more notice you should give.
Suggested Language: Alternative B
- Terminating the Agreement
- Either party may terminate this Agreement any time by giving [state term of notice] written notice to the other party of the intent to terminate.