Key Elements of a Sound Independent Contractor Agreement

There are many reasons why businesses across Arizona and throughout the country opt for independent contractors over employees to get certain jobs done. Hiring a full-time employee imposes a set of legal responsibilities on a company. Contracting with an individual for a certain project or period of time offers greater flexibility. However, your business can only reap the benefits this type of working relationship if the agreement is drafted correctly and completely.

If you’re looking to being on a contractor, the document should be tailored to the specific nature of the work you want done. At a minimum, a sound independent contractor agreement should address the following:

• Scope of work and deliverables — Even if you believe an assignment is relatively simple, your agreement must include a precise description of the services to be performed, what the final result should be and specific quality or performance standards that must be met.
• Payment terms — There are many ways to compensate a contactor for their work. Whether payments are to be made based on hours worked, upon project completion or in some other manner, be clear about rates, invoicing procedures and payment deadlines.
• Timeline and deadlines — You might list exact start and end dates for the engagement or leave the timeframe open-ended. Intermediate milestones might also be useful to ensure that sufficient progress is being made. 
• Classification language — Legal problems can arise when a question exists about whether a particular worker is an employee or an independent contractor. Simply referring to someone as a contractor might not suffice. It is wise to declare that the person controls the manner and means of their work, and that your business is not responsible for withholding taxes or providing benefits. Under A.R.S. § 23-902(D), a written agreement can establish a rebuttable presumption of an independent contractor relationship for workers’ compensation purposes if it specifies that the individual is not entitled to coverage, operates free from direct supervision, is not bound to exclusive service, receives project-based compensation and supplies their own tools.
• Protection of intellectual property and confidential material — If the work involves sharing of trade secrets, proprietary business information, intellectual property or other confidential materials, you can insert language penalizing the contractor for any unauthorized release to a third party. 
• Termination provisions — There might be reasons to end the relationship ahead of schedule. Your contract can cover notice requirements and any post-termination obligations if this occurs.

Other relevant statutes include A.R.S. § 23-1601, which gives companies the chance to execute a Declaration of Independent Business Status (DIBS) form, and A.R.S. § 23-1603, which covers legal criteria for marketplace contractors, sometimes referred to as “gig workers.” An experienced Arizona business law attorney can draft or review your independent contractor agreements to ensure they are legally sound and appropriate for the given engagement.

The Law Offices of Donald W. Hudspeth P.C. offers comprehensive counsel to Arizona businesses on matters relating to independent contractor arrangements and other concerns. To schedule a consultation in our Phoenix office, please call 866-696-2033 or contact us online.