The principal has a business. The contractor has a different business. The principal requests and pays for some services. The person providing the services is the contractor. The contractor is ‘independent’. The contractor is not an employee.
Independent Contractor Agreement
The principal has a business. The contractor has a different business. The principal requests and pays for some services. The person providing the services is the contractor.
The contractor is ‘independent’. The contractor is not an employee.
Employees have rights. An employer provides annual leave, sick leave, long service leave and superannuation. An employer tells the employee when and where to go to work. The employer provides control and direction.
In contrast, independent contractors operate their own business. Contractors set their own fees and working conditions.
However, the difference between an employee and a contractor can blur.
The Independent Contractor Agreement you are building helps prove that the contractor is a contractor and not an employee. But an Independent Contractors Agreement is not conclusive. Just because you say a person is a contractor that may not be enough.
Many different things decide whether you are dealing with someone as a contractor or as an employee.
|Common for Employee||Common for Contractor|
|Directed and supervised||In control and may delegate work to another person|
|Works 9-5||Works to complete the task|
|May work for you for many years||Performs the contract or a specific task eg. deliver 30,000 widgets|
|Employment Contract||Independent Contractor Agreement or Service Trust Agreement|
|No risk of capital or financial risk||Makes a profit out of dealing with the principal, won’t get paid if Contractor fails to perform|
There are extensive confidential clauses in the Independent Contractor Agreement. This protects the principal. See the Sample.
The general obligations to be confidential, loyal and act in the principal’s best interest is in the Independent Contractor Agreement.
The Agreement is set up so you can refer to other documents by an exchange of emails. The other documents could include the scope of work, plans, diagrams and specifications. Amend the Independent Contractor Agreement by an exchange of emails at any time.
A doctor, accountant, lawyer, engineer and other professional partnerships often operate a ‘service trust’ using a Unit Trust, company or Family Trust. You need an Independent Contractor Agreement (Service Trust Agreement) to make this work. Read the hints as you build the document.
You are building your legal document on a law firm’s website. You can telephone us anytime to get legal advice. We can help you answer the questions.
Adjunct Professor Brett Davies, CTA, AIAMA, BJuris, LLB, Dip Ed, BArts(Hons), LLM, MBA, SJD
Legal Consolidated Barristers & Solicitors
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