Who is an Independent Contractor?
An independent contractor is a person, business, or corporation that provides services to another entity based on terms agreed to by both parties. Independent contractor arrangements are typically formulated through a contract or verbal agreement. For the tax year 2018, the Internal Revenue Service (IRS) defines an independent contractor as someone who performs the services where you can control or direct only the result of the work and not the means and methods of accomplishing it. An independent contractor is differentiated from an employee connected with a company through a contract of hire , which can be either express or implied. The major factor that differentiates the two types of workers is usually the degree of control exercised by the employer. An employee typically does what he or she is told to do by the employer, while an independent contractor usually has autonomy to complete projects he or she was contracted to do, assuming all guidelines are followed, and according to the methods he or she chooses. In general, when an independent contractor comes under scrutiny, legal issues involve contract disputes, negligence, fraud, corporate structuring, misrepresentations, tax fraud, misclassifying employees, or a lack of licensure.
Why Retain an Independent Contractor Attorney?
Every independent contractor, no matter how good they are at reading the language or interpreting documents, should still hire a lawyer. The first reason is something that should always be done in business: negotiate. If you’re first starting out and coming to an arrangement with a client, there’s almost always room for movement. Similarly, if you’re trying to renew a contract, raise your fees, or otherwise change an existing arrangement, it’s always a good idea to run those ideas past an attorney. They can provide you insight based on similar deals they have encountered with other independent contractors, or ones they are currently involved with themselves.
Second, there is the possibility that you may have to go to court. If you are in a disagreement over payment with one of your clients and have not laid out clear stipulations based on the contract (or even if you just want to talk about your disagreements), going to mediation or litigation is not uncommon. Both situations are complicated, and you will want a lawyer who is familiar with the process to help navigate them.
Third, you need to ensure that you comply with all local, state, and federal laws controlling your dealings as an independent contractor. A lawyer can help you interpret those statues and ordinances and explain how they affect you. If you have questions about your independent contractor status, for example, it will be difficult for yourself to answer them without hiring a labor and employment attorney, as they are the most qualified to interpret the law and help you figure out your proper classification.
Common Legal Issues of Independent Contractors
Common legal challenges for the independent contractor include misclassification, breach of contract, and reputation concerns. The IRS expects contractors to be completely or highly independent from their employer. If not, they may have misclassified you as an independent contractor. This can lead to complex legal issues over who is responsible for employment taxes. Timesheets, travel expense payments, and other documentation about your work should be made available to you whenever necessary. Otherwise, it is possible that a violation of the Fair Labor Standards Act (FLSA) regarding wage and hour payments has occurred.
Depending on circumstances, it may be possible to sue the employer for damages over any apparent misclassification of your contract status. You may also be able to get help through the IRS. You have 20 years from the date they complained to the IRS to pursue the matter.
If you signed a contract with a non-compete clause, the employer may allege you violated said clause. In some cases, they may sue you over it. In certain states, this could result in jail time and large fines. Even if they do not sue you, your reputation and income can be significantly damaged if you do not support their claims. Consider seeking a professional opinion on contract language before you sign a contract.
Claims of unjust termination or differences in pay are common as well. If you have a contract that asserts the details of your position, this can help ensure you receive the amount of pay you deserve. Otherwise, you may have difficulty getting pay increases or more desirable positions.
Preparing and Reviewing Agreements
An attorney is often called upon to draft contracts for a professional service vendor or independent contractor. This is a critical task because there are many legal issues that must be addressed in the contract to protect the independent contractor. For instance, an attorney can provide for equitable remedies for their client in the event of a breach of contract. In many cases, the default remedy in a contract is money damages; however, equitable remedies such as injunctive relief or a constructive trust may be appropriate under the circumstances. The authority for equitable relief in New York is sometimes found in the context of an employment contract, however, it is not limited to that context. An attorney is well versed in when equitable relief may be appropriate and provide for those circumstances in the contract.
Confidentiality clauses are also an important part of a contract with an independent contractor or professional services vendor. Confidentiality obligations that go beyond what is found in the general principles of agency are necessary to protect the legitimately confidential information that you may be disclosing to the independent contractor like trade secrets, customer lists, software code, documentation, and other information which, if disclosed, could harm your company. A contract attorney is also able to provide for the return of confidential materials at the end of the engagement to prevent any unauthorized use or further disclosure after the work on the project is complete.
Negotiating Equitable Provisions
A knowledgeable employment attorney can guide an independent contractor through the process of negotiating a contract to ensure fair compensation and terms. An attorney familiar with various contracts and agreements will understand how to wheel-and-deal with a potential employer regarding the terms of remuneration. Even if the potential employer suggests the initial payment terms, an attorney might advise that the contractor counter with a shorter payment schedule. This will be an important point to negotiate, especially when compared with the law of the employer’s domicile. For example , are there any laws in the employer’s state that require an individual be paid on a weekly day shift?
An attorney can also assist in negotiating elements of the contract, such as the choice of law that would apply to the agreement; when and where payments would be due; and any bonuses and/or stock options connected with service to be rendered.
Furthermore, an attorney may advise on whether certain post-employment provisions – such as non-compete and non-solicitation agreements – should be included in the contract and whether the contracts meet the legal requirements of enforceability. Also, an attorney should discuss with the contractor any tax implications that arise from receipt of payments pursuant to the contract.
Safeguarding Intellectual Property Assets
Unlike many employment agreements, a contract with an independent contractor should incorporate consideration for the contractor’s intellectual property rights. The extent of care will depend on the nature of the work being performed, but it becomes particularly important when the project involves a unique product or creation. When an artist, architect, engineer, or programmer is engaged as an independent contractor to create something new, there are critical ownership and protection issues to address.
An attorney can help you think through strategies to address these concerns. He or she can help you determine, for example, who will own the finished creation? Will the contractor grant you an exclusive license to sell or further develop it? Or will you have outright ownership of all the rights therein? The role the contractor will play, whether he or she will be involved in later decision making concerning the creation, and the nature of the project, will all inform the best way to address intellectual property in the agreement.
Selecting an Attorney
When looking for an experienced independent contractor attorney, examine their qualifications. Are they a graduate of a state bar? Do they frequently publish articles or give speeches on independent contractor law? Do they have a consistent track record of victories in independent contractor law cases? When a potential attorney answers yes to these questions concerning their own qualifications, you may want to take a closer look at that attorney.
Further, you should also consider the attorney’s experience and success rate handling independent contractor law cases . Do you think the case would be well handled as it goes through the independent contractor legal process? Has the attorney won many cases involving independent contractor issues? If you were another client involved in an independent contractor case, would you want that attorney to represent you?
Even better are client testimonials. Do you think this attorney works tirelessly to achieve positive results? Would the attorney be diligent or prompt, as opposed to lazy or negligent? Has he or she been able to bring satisfactory results, or has the attorney consistently left clueless or dissatisfied clients behind them?
If you find an experienced independent contractor attorney who has a strong record of independent contractor law cases as well as independent contractor law client testimonials, this may be the right attorney for you.