A written contract is the surest way of clarifying results and the fees you’ll pay to get those results. Contracts and agreements can also help establish a contractor’s independent status in the eyes of government agencies.
Your contract or agreement should clearly spell out the scope of the project. It should define specific objectives and goals. This is the time for negotiation between you and the IC. Give the contract process time, so that each of you has the opportunity to explore the options. The goal is to develop a mutually beneficial arrangement and create a contract that will be your roadmap to a successful relationship.
It needs to include such information as:
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Amount of the fee and when it will be paid
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Detailed description of services to be provided
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Schedule of work to be performed, with deadlines
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Terms of confidentiality
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Incentives for the contractor
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How the contractor’s work will be monitored and evaluated
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How disputes will be
resolved
If you hire an IC to create an artwork, written work, photograph, computer program or other work of authorship, you need to address copyright ownership. In general, the IC owns the copyright unless he specifically provides you with a written transfer of copyright ownership. Include this assignment of ownership in your contract. There are exceptions to this copyright rule, such as when an IC creates a work for hire. These works include such things as instructional texts and maps. In these cases, your contract should stipulate that the work is made for hire.
Legal nightmares may haunt you if you misclassify an employee as an independent contractor. Just look at Microsoft. The software giant paid a small fortune after the IRS determined that the company had improperly classified common-law employees as independent contractors. If the IRS finds that an IC is actually an employee of your business, the judgment opens the door for lawsuits. Independent contractors have successfully sued former clients for unemployment insurance, workers’ compensation and disability payments. Some have succeeded in getting retroactive vacation, holiday and overtime pay, in addition to receiving stock options and retirement benefits.
