Consultant & Independent Contractor Agreements

Stephen Fishman

• Publisher: NOLO
• Year: 2020
• Print ISBN: 9781413327953
• eBook ISBN: 9781413327960
• Edition: 10
• Topic: Business
• Subtopic: Consulting
• Index: Business

Get your contract in writing

With the rise of the gig economy, independent contractor arrangements are more common than ever. Whether you're an independent contractor or a business hiring one to work for you, a written agreement will help to protect your rights, define expectations, and prove that there's no employer-employee relationship.

Here you'll find specific agreements for many types of independent contractors and freelancers, including salespeople, accountants, software consultants, and construction contractors. You'll learn how to:

• draft a binding agreement
• define a project's scope
• preserve confidentiality
• distinguish between employees and independent contractors
• protect your intellectual property
• amend your agreement, and
• satisfy IRS requirements.

Each chapter has two agreements—one geared towards the independent contractor and one geared towards the business hiring an independent contractor.

The 10th edition—completely updated to provide the latest rules and regulations—includes a useful chapter on agreements for gig workers.

With downloadable forms: download all the forms you need to draw up a solid contract (details inside).

CHAPTER

1

How to Use This Book

Why Use Written Agreements

Oral Agreements Are Legal But Dangerous

Advantages of Written Agreements

Agreements Contained in This Book

Putting Your Agreement Together

Signatures

Dates

Attachments or Exhibits

Altering the Agreement

Copies of the Agreement

Using Electronic IC Agreements

Cover Letter

Changing the Agreement After It’s Signed

Oral Amendments

Written Amendments

Drafting Written Amendments

This chapter explains how to use this book to put together agreements that will serve your business needs, legally and efficiently.

If you need some legal background on hiring independent contractors, refer to Chapter 2. If you would like an introduction to the legalities of working as a consultant or IC, refer to Chapter 3.

RESOURCE

This book is intended to serve as a supplement. For detailed guidance on all the legal issues involved in either hiring ICs or working as one, see:

• Working With Independent Contractors, and

• Working for Yourself: Law & Taxes for Independent Contractors, Freelancers & Gig Workers of All Types.

Both books are authored by Stephen Fishman and published by Nolo.

Get Updates, Forms, and More at Nolo.com

You can find the online companion page to this book at:

www.nolo.com/back-of-book/CICA.html

From this page, you can download all of the forms and worksheets in this book. You will also find important updates to the law, podcasts, blog posts, and more.

Why Use Written Agreements

Using written independent contractor or consulting agreements benefits the independent contractors and consultants, as well as the clients who hire them. For the sake of simplicity, the terms “consultant” and “IC” are often used interchangeably in this book. People who hire ICs are referred to as “clients” or “hiring firms.”

Some Agreements Must Be in Writing

Some types of agreements must be in writing to be legally enforceable. These are agreements dealing with important transactions that are likely to lead to misunderstandings or even deception. Each state has a law, usually called the “statute of frauds,” that lists the types of contracts that must be written to be valid. A typical list includes:

•any contract that cannot possibly be performed in one year

EXAMPLE: Denise is hired to perform consulting services for the next two years for $2,000 per month. Because the agreement cannot be performed in less than one year, it must be in writing to be legally enforceable.

•contracts for the sales of goods—that is, tangible personal property, such as a computer or car—worth $5,000 or more

•a promise to pay someone else’s debt

EXAMPLE: John is hired to perform consulting services for Acme Corporation. John is worried he won’t be paid on time, so Sheila, Acme’s president, personally guarantees John’s payment—that is, she promises to pay John out of her own pocket if Acme Corporation doesn’t. The guarantee must be in writing to be legally enforceable.

•contracts involving the sale of real estate

•real estate leases lasting longer than one year, and

•any transfer of copyright ownership.
(Copyright issues are covered in Chapter 11.)

A few states, including California, require contracts between buyers or sellers and their real estate brokers or agents to be in writing, but most states don’t.

RESOURCE

For detailed guidance on all aspects of contract law, refer to Contracts: The Essential Business Desk Reference, by Richard Stim (Nolo).

Special New York City Rules for Firms Hiring Independent Contractors

New York City’s “Freelance Isn’t Free Act,” the first law of its kind in the nation, is intended to protect ICs from hiring firms that fail to pay them. The law applies to all individual ICs hired after May 15, 2017, except for sales representatives, lawyers, or licensed medical professionals. The Act does not apply to multi-owner corporations, limited liability companies, or partnerships, or other entities with more than one owner. (To read the law, go to: www1.nyc.gov/site/dca/workers/workersrights/freelancer-workers.page).

The Act includes several requirements, including putting certain agreements in writing, as well as penalties for noncompliance.

Written contracts. A written contract must be used whenever an IC is hired to perform work with a value of $800 or more, by itself or when combined with all contracts between the parties over the prior 120 days. The contract must include:

•the parties’ names and mailing addresses

•an itemization of services to be provided

•the value of services to be provided

•the rate and method of compensation, and

•the date when the hiring party must pay the IC or the method by which the date of payment will be determined.

The New York City Office of Labor Standards has created a model IC contract, available to the public on its website at www1.nyc.gov/site/dca/workers/workersrights/
freelancer-workers.page. The sample IC agreements in this book also meet the above requirements.

Obligation to pay IC. If the contract doesn’t specify when the contractor will be paid, payment must be received no later than 30 days after the work is completed. A hiring firm cannot require an IC to accept less than the amount called for in the contract in exchange for timely payment.

Penalties for noncompliance. If a hiring firm fails to timely pay an independent contractor, the IC can file a lawsuit and obtain damages equal to twice the amount owed plus attorneys’ fees. Failure to provide a written contract by itself can result in statutory damages of $250. If both of these provisions are violated, the IC can obtain a total sum equal to the three times the value of the contract. Hiring firms that repeatedly violate the Act can also be fined up to $25,000 by the New York Office of Labor Standards.

To enforce these rules, ICs can file a complaint with the New York Office of Labor Standards. ICs can also recover damages from hiring firms that retaliate against workers who exercise their rights under the law.

Oral Agreements Are Legal But Dangerous

Most contracts need never be written down to be legally valid. (For exceptions to this general rule, see “Some Agreements Must Be in Writing,” above.) For example, a client and an IC can enter into a contract over the phone or during a lunch meeting at a restaurant. No magic words need be spoken, and nothing has to be written on a piece of paper. They just have to agree that the IC will perform services for the client in exchange for something of value—usually money. Theoretically, most oral agreements are as valid as a 50-page contract drafted by a high-powered law firm.

EXAMPLE: Gary, a freelance translator, receives a phone call from a vice president of Acme Oil Co. She asks Gary to translate some Russian oil industry documents for $2,000. Gary says he’ll do the work for the price. Gary and Acme have a valid oral contract.

In the real world, however, using oral agreements is like driving without a seatbelt—there’s no problem as long as you don’t have an accident, but if you do have an accident, you’ll wish you had buckled up. An oral IC agreement can work just fine provided that you and the other party remember the contract’s terms in the same way and fulfill them as expected by the other party.

Unfortunately, things don’t always work so perfectly. Courts are crowded with lawsuits filed by people who entered into oral agreements with each other. Costly misunderstandings can develop if an IC performs services without a clear written description of what he or she is supposed to do and what will happen if it isn’t done. Such misunderstandings may be innocent—you and the other party may have misinterpreted each other or failed to listen carefully. Or they may be purposeful—without a written document to prove otherwise, the other side can claim that you orally agreed to anything.

A good written IC agreement is your legal life-line. If properly drafted, it will help prevent disputes by making clear exactly what’s been agreed to. If problems develop, it will provide ways to solve them. If you and the other party end up in court, it wi...

Table of contents

• Cover
• Title
• Copyright
• Acknowledgments
• About the Author
• Table of Contents
• Your Legal Companion for Consultant and Independent Contractor Agreements
• 1 How to Use This Book
• 2 Hiring Consultants and Independent Contractors
• 3 Working as a Consultant or Independent Contractor
• 4 Enforcing Consultant and Independent Contractor Agreements
• 5 General Independent Contractor Agreements
• 6 Consultant Agreements
• 7 Agreements for Household Services
• 8 Agreements for Salespeople
• 9 Agreements for Accountants and Bookkeepers
• 10 Agreements for Software Consultants
• 11 Agreements for Creative Contractors
• 12 Agreements for Construction Contractors
• 13 Agreements for Messengers, Couriers, and Delivery People
• 14 Agreements for Social Media Consultants
• 15 Agreements for Gig Workers
• Appendixes
• Index