What You Need to Know About Independent Contractor Agreements
If you’re a business owner living in New York, chances are you’ve considered engaging independent contractors at some point3 min read
If you’re a business owner living in New York, chances are you’ve considered engaging independent contractors at some point. While the move toward flexibility has allowed companies to introduce a range of cost-saving measures and increase efficiencies, it also presents legal issues for both employers and workers. By understanding the important considerations for independent contractor agreements, you can ensure that all parties will be satisfied with the arrangement – and that any potential risks are minimized.
An independent contractor agreement is the binding agreement used to outline the contractual terms and conditions between an employer and their worker. It is essential to have one in place before a contractor begins any work. Without an independent contractor agreement in place, the obligations and responsibilities of the employer and contractor are not clearly defined, which could create problems down the line. It’s therefore important to make sure that the agreement covers everything concerning the job as accurately as possible. Here are the top five things you need to keep in mind when drawing up an independent contractor agreement.
1. Determine Independent Contractor Status
The most important consideration when deciding to engage an independent contractor is to make sure that the worker really qualifies for the “independent contractor” status. The legal definition of an independent contractor varies between states, with New York’s definition being particularly complex. You will need to establish that the relationship between you and your prospective contractor meets all of the criteria, as not doing so could lead to serious repercussions. This could include fines for backpayments of overtime and benefits, investigations, and even charges of misclassification. So double-check that the worker meets all the criteria in advance – if not, you may be better off with an employee instead.
2. Cover Important Provisions
With the legal implications established, you need to ensure that the independent contractor agreement covers all the parameters of the job, including its duration, deliverables, payment terms, and termination protocol. As a general rule, you will need to include such provisions as scope of work, non-disclosure, and non-compete agreements, as well as detailing the expected outcomes, payment process, tax withholding, and acceptable circumstances for terminating the agreement.
3. Outline Taxes and Insurance
Another important matter to cover in the independent contractor agreement is taxation, which can be complicated in New York. Since contractors are not eligible for employee benefits, they must submit the correct paperwork in order to pay their taxes correctly. As such, you will need to make sure that the agreement stipulates that the contractor is responsible for all taxes owed and insurance expenses.
4. Consider Working Hours
Contractors are not necessarily subject to the same working hours and overtime rules as employees, but they should be made aware of the conditions regarding their working hours. Having these issues clearly stated in the contract will save any misunderstandings down the line.
5. Get the Most Suited Legal Counsel
Despite taking all the necessary steps to protect your business when signing an independent contractor agreement, it’s still important to invest in professional legal counsel to ensure that all clauses comply with New York State regulations. UpCounsel’s network of experienced lawyers have a wealth of knowledge and expertise in their field, so are ideally placed to devise independent contractor agreements that protect your business rights, without compromising the rights of the worker.
Engaging independent contractors can be a beneficial move for small businesses looking to reduce costs and increase efficiency. While setting up an independent contractor agreement has the potential to cause headaches, it is necessary to ensure that all parties are fully informed about the parameters of the working relationship and that regulations are adhered to. By taking into consideration the points outlined above and engaging the right legal counsel, you can ensure that the agreement you produce is water-tight and fairly balanced.