Independent Contractor relationships are a great way for people to help each other with the services they provide without having the extra obligations that come with having employees. In Denver and Colorado, there are many companies that need services from independent contractors and vice versa. However, you should be sure that your independent contractor relationship contains these valuable provisions so that you are best protected from risk.
- Relationship of the Parties
The agreement should clearly state that the relationship is an independent contractor relationship. Even though courts look to the actual substance of a relationship, it is important that the parties have this provision. Why? Because you do not want to cross over into an employer-employee relationship which has tax, HR, etc. consequences. The contractor will also want to specify that they can engage in other business, whether it conflicts with the company’s business or not.
Both parties will want to specify how and when they can terminate the agreement and what consequences that has. This provision should include things such as how much notice is required to terminate, how/when the contractor is paid for work done up until that point, and how the parties will tie up loose ends.
Will the contractor gain access to confidential information (CI) of the company? If so, then your agreement should contain a confidentiality provision. It will detail the obligations of the contractor regarding the CI, what counts as CI, and how to dispose of CI at the end of the relationship. This is likely valuable information to the company and can include customer lists, business operations, financial information, etc. CI in the wrong hands can harm the company. Likewise, a contractor will want instruction on how it should act towards CI.
If subcontracting is common in your industry, you will want to make sure that your agreement allows you to subcontract your obligations if need be. Without this provision, the other party may have an argument against blocking the contractor’s ability to subcontract.
5. Reps and Warranties
Representations and warranties are essentially promises that parties make to each other regarding the transaction. These are helpful because each party that makes a representation or warranty must ensure that they remain true or are upheld throughout the transaction and afterwards or else they may be liable for breach of contract. Reps and warranties vary but an example could be that the contractor reps and warrants that work will be up to a certain standard.
An insurance provision could be very important depending on the industry. Here the company can ensure that the independent contractor maintains adequate insurance to cover its liabilities for the work that its doing.
Non-solicitation clauses can also be very valuable, especially for the company. In Colorado, only non-solicitation clauses pertaining to employees is valuable though. Non-solicitation of customers is typically not upheld in court.
There are lots of details that can go in each of these sections and, of course, these are not all the provisions that will appear in an independent contractor agreement, just some important ones. Your attorney can make sure that they are drafted to fit your needs and adequately protect your interests. Reach out to Miles Williams at firstname.lastname@example.org for help with you independent contractor agreement. Visit our website to see how else we can help you.