Important Disclaimer
A well-drafted contract does NOT make someone an independent contractor. The actual working relationship determines classification. If the reality is employment, calling it "independent contractor" in a contract won't change that.
When IC Agreements Are Appropriate
Use independent contractor agreements only when the relationship genuinely satisfies the ABC Test or qualifies for an exemption:
- Worker is free from control (Prong A)
- Work is outside your usual business (Prong B)
- Worker has independent business (Prong C)
- OR an exemption applies (B2B, licensed professional, etc.)
Essential Contract Clauses
1. Relationship Statement
Clearly state the independent contractor relationship, but avoid overreaching language that contradicts reality.
Good: "Contractor is an independent business providing services to Client."
Avoid: Lengthy disclaimers trying to contract around employment law.
2. Scope of Work
Define the specific project or services, not an ongoing role:
- Describe deliverables, not hours or attendance
- Set milestones or project completion criteria
- Allow contractor to determine methods
3. Payment Terms
Structure payment to reflect contractor status:
- Pay per project, milestone, or deliverable (preferred)
- If hourly, ensure contractor sets rate and isn't guaranteed hours
- Include invoice requirements
4. Tools and Equipment
Contractor should provide their own:
- Computer, software, tools
- Work location (their office, not yours)
- If you must provide something, explain why and document
5. Insurance and Compliance
Require contractor to maintain:
- General liability insurance
- Workers' compensation (if they have employees)
- Professional liability (E&O) if applicable
- Business licenses and permits
6. Intellectual Property
Address ownership of work product:
- Work-for-hire provisions (limited applicability)
- Assignment of rights
- Pre-existing IP retained by contractor
Red Flags to Avoid
Contract Terms That Suggest Employment
- Required work hours or schedules
- Mandatory attendance at meetings
- Exclusive relationship provisions
- Control over how work is performed
- Training requirements (beyond project-specific)
- Performance reviews like employees
- Indefinite term with no end date
Contract Terms That Support IC Status
- Project-based scope with defined end
- Contractor controls methods and schedule
- Right to work for others
- Contractor provides own tools
- Contractor has own business entity
- Contractor invoices for services
- Contractor responsible for own taxes
B2B Exemption Requirements
If relying on the B2B exemption, the contract should document:
- Contractor's business entity information
- Contractor's separate business location
- Contractor's ability to serve other clients
- Contractor's required licenses/permits
- Contractor's own tools and materials
- Rate negotiation (not fixed by you)