Key Takeaways

  • New Hampshire uses specific legal tests to determine whether a worker is an employee or an independent contractor.
  • Misclassification of workers can lead to significant legal and financial consequences, including back pay, taxes, and penalties.
  • Independent contractor agreements should clearly define the scope of work, autonomy, and limitations like non-compete clauses.
  • Courts in New Hampshire may scrutinize non-compete clauses more strictly when applied to independent contractors versus employees.
  • Businesses should ensure compliance with both state and federal regulations when drafting and enforcing independent contractor agreements.

New Hampshire contract law involves the same elements as general contract law. A contract is an agreement between two or more parties that generates a legal responsibility to do (or not do) at least one specific thing. To be legally enforceable, a contract must include two or more legally competent parties, consideration, and mutual assent.

What Are the Elements of a Contract?

For a contract to be legally enforceable, it must contain the following elements:

  • Competent parties — Each party must have the mental capacity to understand the agreement at hand. Most individuals and companies have legal competency. For more details, read the next section, "Who May Enter a Contract?"
  • Consideration — Consideration is broadly defined as the motivation for the agreement. It could be the cause, reason, material benefit, interest, motive, price, compensation, or whatever else that warrants an agreement, as determined by the parties entering the contract.

Each party must receive valuable and identifiable consideration, or else the exchange is considered a gift, rather than a contract that can be enforced. The most common type of compensation is money, but it may also be making a promise to do or not do something, property, or giving up a claim to something. Illegal acts are not permitted within legally binding contracts and, if contained within the contract, will void it.

  • Mutual Assent (or Meeting of the Minds) — Each party must understand the contract's important details, obligations, and rights. It's helpful to put the deal into writing prior to signing it, so that each party can clearly see the terms and maintain a copy of the contract.

It's harder to prove what exactly the contract terms were if they are not in writing. However, it's not necessary to have the contract in writing in order for it to be legally enforceable. Mutual assent can be expressed by spoken words, gestures, or may be inferred from the context of the situation. Mutual assent is not valid if one party is obviously joking, if no actual agreement between both parties is made, or if both parties have made a material mistake as to the details or terms of the agreement.

Who May Enter a Contract?

Each state defines what is required in order to be considered mentally competent. In general, a minimum age and mental capacity are required, to ensure that one is fully able to understand the terms of a contract.

In New Hampshire, the age of majority is 18, which is required to be considered competent. If a minor tries to enter a contract, a court may refuse to enforce it. However, a minor may enter a contract with parental consent, or if they need necessities of life, such as clothing or food, or for student loan contracts. In addition, New Hampshire defines mental capacity as a person's capacity to understand their own actions and to appreciate the consequences of forming a contract.

Mental capacity may be interpreted in various ways, but generally, a mentally impaired person or any person who has been drugged is considered mentally incapable. Aside from minors and the mentally incompetent, people are generally assumed to have the power to enter themselves into binding contracts.

Corporations also have the ability to enter into contracts, but may only do so by particular employees who have the authority to bind the company into a contract. If you are dealing with an individual and have doubts about whether they have the authority to enter into an agreement with you, request that the corporation's president review and sign the contract. Typically, the people associated with corporate contracts are not themselves responsible for the company's debts or liabilities, including breach of contract.

Business Contracts

Whether a business contract or a contracted associated with a personal matter, the agreement must be drafted in a distinct and legal way. The language needs to be clear (plain English) and the contract details must be organized in a way that both parties understand and can agree upon. A certain contract format exists, which, if deviated from, can cause confusion and misinterpretation. Specific contract terms and details must be negotiated between all parties before the agreement can be signed and put into effect.

Non-Compete Clauses in Independent Contractor Agreements

When drafting an independent contractor agreement in New Hampshire, including a non-compete clause requires careful legal consideration. New Hampshire courts may treat these clauses differently in the context of independent contractors compared to employees.

In one notable case, a New Hampshire court voided a non-compete clause in an independent contractor agreement because it was overly restrictive and not narrowly tailored to protect legitimate business interests. The court emphasized that independent contractors, unlike employees, are presumed to operate their own businesses and should not be unduly limited from engaging in their trade.

To improve the enforceability of a non-compete clause in a contractor agreement, businesses should ensure:

  • The restriction is narrowly tailored in terms of time, geography, and scope;
  • The clause is necessary to protect trade secrets or confidential information;
  • The contractor had meaningful input in negotiating the agreement.

Given the heightened scrutiny, it is advisable to consult legal counsel before including restrictive covenants in a New Hampshire independent contractor agreement​.

Risks of Misclassifying Independent Contractors

Misclassifying an employee as an independent contractor in New Hampshire can result in serious legal and financial consequences. Government agencies may audit businesses and require back payment of taxes, insurance premiums, and employee benefits. Employers may also face:

  • Liability for unpaid minimum wage or overtime under the Fair Labor Standards Act (FLSA);
  • Penalties for failure to withhold federal and state taxes;
  • Costs associated with retroactive unemployment insurance and workers’ compensation coverage;
  • Civil penalties and legal fees;
  • Class-action lawsuits from groups of misclassified workers.

A notable legal risk involves non-compliance with the New Hampshire Department of Labor’s rules, which can impose fines for each misclassified worker. Moreover, federal agencies like the IRS and the Department of Labor often share audit results, compounding the potential liabilities​​.

Independent Contractor Agreement Requirements in New Hampshire

An independent contractor agreement in New Hampshire must be drafted with particular attention to state-specific legal standards. While these agreements are a common way for businesses to engage non-employees, they must clearly outline the relationship and comply with both state and federal laws to avoid misclassification.

In New Hampshire, an individual is presumed to be an employee unless they meet the criteria for independent contractor status. This presumption places the burden on businesses to prove otherwise. A written contract alone is not sufficient—courts and agencies will look at the practical realities of the relationship.

To qualify as an independent contractor under New Hampshire law (especially for purposes such as workers’ compensation and unemployment insurance), the individual must generally:

  • Be free from control or direction over the performance of their services (both under the contract and in practice);
  • Perform services that are outside the usual course of the hiring entity’s business;
  • Operate independently and maintain a separate business or trade;
  • Be responsible for obtaining necessary business licenses or registrations;
  • Hold themselves out to the public as available to perform similar services for others;
  • Provide their own tools and set their own schedule.

These factors align closely with the “ABC Test” used by the New Hampshire Department of Employment Security (NHES) and other regulatory agencies​​.

Frequently Asked Questions

  1. What is required in an independent contractor agreement in New Hampshire?
    A valid agreement should outline the scope of work, establish that the contractor is free from direction and control, and include terms that support the contractor’s independent business status.
  2. Can independent contractors in New Hampshire be subject to non-compete clauses?
    Yes, but courts scrutinize these clauses more strictly. They must be narrowly tailored and not unduly restrict the contractor's ability to work.
  3. What legal test does New Hampshire use to classify contractors?
    New Hampshire primarily uses the “ABC Test,” which assesses independence, type of work performed, and the contractor’s business operations.
  4. What are the risks of misclassifying workers in New Hampshire?
    Employers may face back wages, taxes, penalties, and potential lawsuits if a worker is found to have been misclassified.
  5. Can a written contract alone prove independent contractor status?
    No. Courts will examine the actual working relationship, not just the language of the contract, when determining status.

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