Working with an independent contractor is an effective to increase productivity without adding dollars to your payroll. Whether you hire a contractor to perform services outside of your expertise, or to handle a short-term spike in demand, contractors are a popular option for many business owners.
Working with an independent contractor, however, can lead to legal nightmares if you don’t properly prepare. It’s vital that your contract is specific and exhaustive. Here are four areas that must be covered in your agreements:
Clearly define the deliverables. What exactly are you expecting from the contractor? When and how will you receive any deliverables? Go into detail to ensure that there are no surprises, and no legal gray areas. It’s not good enough to have this conversation verbally – it needs to be thoroughly spelled out in the signed contract.
Payment details. Will your contractor be paid on a per-job basis? Will he/she be paid hourly? If hourly, how will time be tracked and verified? When is payment due? Is there a mechanism for changing the payment amount based on unexpected circumstances? What happens if you wish to cancel the job halfway through? Does the contractor speak with your customer directly of work through you? Obviously, these details have financial repercussions for your business, so spell them out clearly.
Who pays the expenses? Who covers expenses, such as supplies, travel, and so forth? In many cases, contractors are responsible for their own expenses, but don’t make assumptions. If you will be covering certain expenses, clearly list the guidelines and set limits. If expenses are not covered, say so in writing.
What happens if there’s a mistake? If your contractor makes a mistake, such as delivering malfunctioning products, who is liable for the breach of contract? Are products accepted upon delivery, or do you have 24 hours to inspect? How much time does the contractor have to cure any defect? Does the contractor bear liability for delays caused to you and your client? Does the relationship create an agency, and can the contractor obligate your business without your express authority? All of these terms and conditions are negotiable, but must be memorialized in writing.
Working with a contractor is often a great business strategy. But a detailed, specific and thorough contract is necessary to protect your interests. If you’d like to learn more, or need help creating or refining your contractor agreements, give us a call at (305) 431-5678.