Organizations and Independent Contracts

Contracts and Contracting: Laws, Issues, and Tips

A Contract is described as “a written or spoken agreement, especially one concerning employment, sales, or tenancy, that is intended to be
enforceable by law.” (1) Generally, a contract should be set in place to legally bind an individual or an organization to the agreed upon work, otherwise, a lawsuit may not stand in court. For an organization, establishing contract agreements is essential to protect itself of any litigation. 

In many cases, organizations opt for Independent Contractor (IC) Services for work. When hiring an IC, organization run the risk of misclassification employees as ICs as there are certain tax (payroll, FICA, etc.) responsibilities tied to the employee, and IRS considers a worker to be an employee unless proven otherwise (2). These risks “can be minimized by following certain tips as stated in this article. 

• The IC’s work should not be supervised and have freedom to hire subcontractors.

• An IC should not be treated as an employee of the company. 

• The organization should not have control over working hours of the IC.

• ICs should be paid based on the invoices submitted by them.

• Follow the terms of the IC agreement, including its termination provisions. (3)

It is essential to create an agreement in the form of contract with the contractor. The agreement should entail the scope of work and the terms of the relationship, including a confidentiality agreement, warranties, and terms related to the end of the contract. 

References:

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1. https://www.oxfordlearnersdictionaries.com/us/definition/english/contract_1?q=contract
2. https://www.thebalancesmb.com/which-should-i-hire-employee-or-contract-worker-398616
3. https://www.nolo.com/legal-encyclopedia/independent-contractors-avoid-classification-problems-35463.html