If you own an established business that is beginning to grow, you will no doubt face challenges as well as opportunities. One of the challenges associated with growing a business is managing labor needs. In some cases, this will mean hiring employees. In other cases, it will mean working with independent contractors and other third parties.
Perhaps the most common problem you hear about with independent contractors is misclassification. Some large companies intentionally misclassify employees as independent contractors in order to skirt tax liabilities and employment protections. Small companies usually do not have to worry about misclassification, but working with ICs can nonetheless be risky.
When you hire an independent contractor, you are entrusting some aspect of your business to a person who has no real stake in it. An IC may create products, perform work or interact with customers in ways that will reflect on your company as a whole. In order to ensure that an IC performs only in ways that help your business, it is important to have a well-written contract in place.
There are many important aspects to an IC agreement. These include:
- Clearly stated expectations of what the contractor should be achieving or producing
- Clearly stated timelines for delivery
- Clear expectations of how the contractor needs to represent themselves during any interactions that could reflect back on your company
- Well-defined incentives and compensation plans to ensure maximum positive motivation
- Clauses that protect intellectual property, trade secrets, etc.
- Clauses that shield your company from liability related to any misconduct on the part of the IC
- Anything else needed to make the agreement clear, fair and enforceable
Most independent contractors worth hiring will go the extra mile without being asked because their success depends on repeat business and positive referrals. But the health and reputation or your business should not be based on any assumptions about a contractor's motivations.
Instead, you need to have thorough and well-written contract in place. To make all of your contracts and strong as possible please seek the help of an experienced business law attorney.