Contract of Service: Everything You Need to Know
A contract of service is an agreement between two parties where one party provides a service to another in return for a monetary reward.3 min read
A contract of service is an agreement between two parties where one party provides a service to another in return for a monetary reward. The contracted employee can hold companies and individuals accountable via the Employment Relations Act (ERA) of 2000, and parties cannot operate outside the confines of the act.
The ERA offers various protections, and all parties must act in good conscience, where mutual confidence and trust must be instilled to make an agreement conducive to all parties. In addition, an agreement should also have provisions for disputes to prevent conflicts from ending up in the courtroom.
Under a service contract, an employer establishes parameters under which an employee can operate. Take note of the following requirements pertaining to employers:
- The agreement should be in written form.
- Depending on state guidelines, an employee must be of a certain age to work (ex. 16 years-old).
- Employers must keep adequate records of the agreements.
- Employees must be paid a minimum wage depending on your state guidelines.
- Employees are entitled to sick leave.
Any agreement that cannot be settled between parties should be resolved in the court system.
Any matter that ends up in court falls under the guidelines of the ERA. Statements regarding relationship status are vital but are immaterial. There is no certain process or rule in determining if a worker is an employee or contractor. The ERA mandates that the courts must consider all pertinent matters when determining the employment status of a worker. When assessing the nature of a working relationship, the courts invoke common law tests and any other pertinent matters when relevant to the case. Vital attributes in which the courts determine a dispute status can involve various factors. The following is a list of vital differences between two types of contracts.
Contract of Service:
- Employee-employer relationship
- Continuous relationship
- Duty of care employees are owed
- Employers are usually held liable for acts of employees
- Contract states that work must be continuous
- Salary/wages payment
Contract for Service:
- A relationship organized surrounding the completion of one-time work
- Contract between an independent contractor and employer
- Duty of care stemming from an occupier’s liability
- The subject matter of the contract pertains to a one-time job
- Lump sum payments for each job completed
These qualities entail additional principals regarding the determination of worker status in cases where disputes take place.
The more controls that are in place mean that the agreement is a contract of service. The exception would be specialized employees who do not have any direction or have little guidance. With that, the Appeals Court turned over a decision on this matter. In addition, there is the preference of analysis of the following:
- Contract Rights
Other Test Types
You should also consider the following tests:
- A control test determines if a worker falls under autonomy or is controlled by an employer. The contractor tends to be autonomous, while an employee usually gets direction
- A contractual intention test determines the beliefs, actions, and communications of parties pre-contractually
- The integration test determines if a worker is vital to the company and not peripheral. Integration comprises factors in the form of wage payments and working on location. Factors that place workers within a workplace setting is a prime feature of employment with the company
- A fundamental test determines if the worker is in business for his or herself on their own account based on a link with profits and losses
Contract for Services
A contract for service is a legally-binding agreement established between a company and a self-employed person. It is different from an employment contract, also called a contract of service, which takes place between an individual and employee who gains employment at the company. The difference lies between services and service. For instance, a self-employed person provides a work on a finite basis, while employed people provide services on a permanent basis.
Such divisions between the two forms also differentiate between individuals who obtain rights through employment and others that do not. A self-employed person does not usually get benefits or rights in the form of:
- Pension plans
- Health insurance
- 401K plan
This is because they are expected to gain such benefits for themselves. You should use a contract for a service document in the following occasions:
- The company will offer services for an individual or business
You will be in a contract with a business to receive certain services.
If you need help with a contract of service, post your legal need on UpCounsel’s marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.