Getting Started on an Independent Contractor Agreement in Chicago
Using Independent Contractors: A Common Practice for Businesses to Outsource Work2 min read
Assigning a contract to an independent contractor is a common practice used by businesses to outsource work and gain access to specialist skills. But in order to ensure both the contractor and the client are properly protected, a written agreement between the two parties detailing the services provided, payment schedules, and other important components usually needs to be established. This is especially true for clients operating in a heavily-regulated region such as Chicago. Here, we’ll discuss some of the essential elements to consider when creating an independent contractor agreement for your business in Chicago.
Understanding the Difference Between Employee and Contractor
The difference between an employee and a contractor isn’t always clear, and misclassification can have significant legal consequences. As a business owner, it’s important to understand the distinction to help ensure you’re compliant with tax laws. Generally, an employee has a fixed salary or wage, works set hours, is given a number of benefits, and is entitled to receive worker’s compensation if needed. An independent contractor, on the other hand, usually sets their own hours and works for numerous clients, billing for the completion of specific tasks. It’s important to identify the roles and responsibilities of the independent contractor to ensure they’re not being treated like an employee.
Getting the Agreement in Writing
In Illinois, a written agreement is not required for contractors, though it’s highly recommended if it’s a contract of any length. This document should include the scope of the work, payment terms, any necessary taxes or fees, and a termination clause. It’s also wise to include a confidentiality agreement and any other relevant clauses, such as intellectual property provisions, to complete the contract. Careful consideration should be given to ensure the contract is legal and all parties are clear on their obligations.
Long-Term Consequences of Misclassification
Miscalculating the agreement between you and an independent contractor can have severe consequences. If a contractor is incorrectly classified as an employee, they may be owed overtime wages and unpaid taxes. The contractor could potentially pursue lawsuits over benefits and rights they feel they are entitled to as an employee, and the business could be faced with serious fines for inaccurate or non-payment of taxes.
Seeking Professional Advice and Guidance
In the majority of cases, businesses are better off enlisting the help of a lawyer experienced in contract law. Contractions attorneys in Chicago will be familiar with local regulations and can ensure your agreement and the classification of the contractor are legally sound. An experienced lawyer can also provide guidance on the potential long-term consequences and how to avoid any misunderstandings or disagreements between the client and contractor.