What to Include in Your Independent Contractor Agreement as a Firm Owner

When drafting an independent contractor agreement for your interior design firm, it’s essential to create a comprehensive and legally sound document that protects both parties involved. While we can provide you with an overview of what to include, we also advise that you consult with a legal professional to ensure your agreement complies with local laws and regulations. Laws regarding ownership of work and non-disclosure vary from one state to the next. Without help from an attorney, you might not know the ins and outs of local or state laws that govern your right to privacy and work product. An attorney will help you ensure all of your rights to the work created during your relationship with the contractor are preserved. He or she will also make sure that you do not blur the lines between employee and IC throughout this relationship. With that said, let’s outline the key elements you must include in every independent contractor agreement.

When to Work with an Independent Contractor

An independent contractor can be an individual or another business entity that provides specialized services on a project-by-project basis. Independent contractors are typically hired to fill specific roles or provide expertise that complements the services of an interior design firm, artist studio, or architecture firm. 

As the owner of such a firm, you might outsource CAD drafters, art consultants, photographers, stylists, writers, or technical specialists. Before doing so, it’s important to understand the key differences between ICs and employees. Check out this post on the blog for more information.

Here’s What to Include in Your Independent Contractor Agreement

An independent contractor agreement allows you to clarify the terms and conditions of your working relationship with individuals or entities hired on a freelance or contract basis. This legally binding document serves several crucial purposes. 

First, it defines the scope of work, payment terms, and project deadlines, ensuring that both parties have a clear understanding of their roles and responsibilities. Second, it establishes the independent contractor’s status – preventing potential misclassification issues and safeguarding against legal disputes related to employment taxes and benefits. Additionally, it includes provisions on confidentiality, intellectual property rights, and dispute resolution – offering protection for your business’s sensitive information and assets. 

Overall, an independent contractor agreement provides clarity, legal protection, and a solid foundation for a successful and mutually beneficial working relationship.

Title and Parties Involved

To begin, you must clearly state that the document in question is an “Independent Contractor Agreement.” You must also identify your firm as “the Company” – using its legal name – and identify the independent contractor by his or her legal name. Provide your business address and the business or home address of your contractor too. 

Scope of Work to Be Performed by the Contractor

Next, you must outline the scope of work to be performed by your contractor. The scope of work in an independent contractor agreement should provide a detailed and comprehensive description of the specific tasks, services, and deliverables the contractor is expected to provide. It should outline the project’s objectives, the extent of the work to be performed, any milestones or deadlines, and any project-related responsibilities. 

This section should also address factors such as project specifications, client requirements, materials or resources to be used, and any limitations or exclusions. By clearly defining the scope of work, both the contractor and the client – that’s you! – can avoid misunderstandings, set expectations, and ensure alignment on the project’s goals and outcomes.

Compensation and Delivery of Compensation

The compensation section of an independent contractor agreement should provide a detailed breakdown of how the contractor will be paid for their services. It typically includes information on the contractor’s fees or rates, payment schedule – e.g., hourly, weekly, monthly, or upon project milestones), and the method of payment – e.g., check, bank transfer, or PayPal. 

It may also specify whether any expenses incurred during the project will be reimbursed, the process for submitting invoices, and the timeframe within which the client or company is required to make payments. Additionally, this section can address any potential penalties or interest for late payments – ensuring that both parties have a clear understanding of the financial aspects of the agreement. Clear compensation terms help prevent disputes and ensure that the contractor is fairly compensated for their work.

Term and Termination or Severance

The term and termination section of an independent contractor agreement outlines the duration of the contractual relationship and the conditions under which it may be terminated. It typically specifies the contract’s start date and the expected end date, if applicable. 

Additionally, this section may detail the circumstances in which either party can terminate the agreement prematurely – such as for breach of contract, failure to perform, or other specified reasons. If so, it must also identify the notice period required for such termination. 

By defining these terms, this section helps both parties understand the expected commitment duration and provides a clear framework for ending the relationship if necessary. This ensures that the agreement is dissolved in an orderly manner without ambiguity or legal complications.

Clear Statement of Independent Contractor Status

Next, you must define your relationship as a client-contractor relationship. This section should explicitly state that the contractor is an independent contractor and not an employee, emphasizing the absence of an employment relationship with the client or company. 

Here, you should outline the contractor’s responsibilities for their own taxes, insurance, and benefits – reaffirming that they are responsible for complying with all applicable laws and regulations governing independent contractors. By including this section, both parties understand and acknowledge the distinct nature of their relationship – minimizing the risk of misclassification issues, tax liabilities, or legal disputes related to employment status.

Confidentiality and Non-Disclosure Agreements if Desired

Depending on the state in which your business operates and the contractor lives, you might choose to include a confidentiality agreement or NDA. Bear in mind that not all NDAs are enforceable, and independent contractors are not held to the same standards as employees. 

If you do include these sections, you should clearly define what constitutes confidential information – which typically includes client lists, proprietary business processes, designs, client-related data, and any other confidential materials the contractor may access during the engagement. This section should specify that the contractor is obligated to keep such information confidential – both during and after the agreement’s term. Outline the consequences of any breaches – such as legal action or financial penalties.

This section might also include exceptions – such as disclosures required by law – to ensure a balanced approach to protecting sensitive information while allowing for necessary legal and regulatory compliance. Regardless, this section serves to protect the client or company’s intellectual property and maintain trust in the business relationship.

In regards to an NDA, remember that enforceability can vary by jurisdiction and depends on the specific language and circumstances of the agreement. If you are considering using an NDA with an independent contractor, it’s a good practice to consult with a legal professional to ensure that the agreement is drafted properly and complies with local laws.

Ownership of Work

The “ownership of work” section of your agreement is one of the most important. This section should unequivocally define the rights and responsibilities concerning the intellectual property created during the engagement. It should specify whether the contractor retains ownership of any original work they produce or whether it becomes the exclusive property of the client or company. 

In cases where ownership transfers to the client or company, this section should outline any exceptions or conditions, such as the contractor’s right to retain copies for their portfolio or the client’s right to use the work for a specific purpose. By clearly addressing ownership, this section ensures that both parties understand their rights and obligations related to the deliverables, minimizing potential disputes over intellectual property rights down the road.

Insurance Requirements if Applicable

Depending on the type of work your independent contractor will provide, you might also include a section about insurance requirements. ​​The insurance requirements section should outline insurance coverage that the contractor is required to maintain throughout the term defined in your agreement to protect both parties. It typically specifies the types of insurance required – such as professional liability insurance, general liability insurance, and workers’ compensation insurance if applicable. 

This section should specify the minimum coverage amounts or limits – naming the client or company as an additional insured party where necessary. Additionally, it may outline the procedures for providing proof of insurance, including certificates of insurance, and the consequences of failing to maintain the required coverage. By including this section, the client or company ensures that there is adequate protection in case of any unforeseen events or liabilities arising from the contractor’s work – reducing potential financial risks and legal complications.

Indemnification Related to the Contractor’s Work

Indemnification is a legal concept that refers to the act of compensating someone for losses, damages, or liabilities they have incurred or may incur in the future. When one party indemnifies another, it means they are agreeing to cover the costs or damages that the other party might suffer as a result of certain actions, events, or circumstances. This is often used in contracts and agreements to allocate responsibility for legal claims, disputes, or losses. 

Depending on the type of work your contractor performs, you might choose to include an indemnification section in your contract. Typically, this section requires that the contractor agrees to indemnify and hold harmless the client or company from any claims, damages, losses, or expenses resulting from the contractor’s actions, negligence, or breach of contract. 

It may also specify exceptions to indemnification – such as claims caused solely by the client or company’s actions or decisions. 

By including this section, the agreement ensures that the contractor bears the financial burden of legal issues related to their work – thereby protecting the client or company from potential financial and legal consequences.

Procedures for Dispute Resolution

An attorney might recommend that you also include a dispute resolution section. This section outlines the process and procedures that both parties should follow in the event of disagreements, conflicts, or disputes arising from the contract. As a first step, it may stipulate that the parties attempt to resolve disputes through negotiation or mediation before pursuing more formal legal action. 

Additionally, it can specify the jurisdiction and venue for legal actions, such as the location of arbitration or litigation, and the prevailing party’s entitlement to recover legal costs. Including this section proactively establishes a framework for resolving disputes in a fair and structured manner – potentially avoiding costly and time-consuming litigation while providing clarity on the steps to be taken should conflicts arise during the course of the contract. 

Government Jurisdiction

If your company’s headquarters and the independent contractor are located in different cities, states, or nations, you might also include a government jurisdiction section. This section should clearly specify the legal jurisdiction and governing law that will apply to the agreement. That means designating the particular state, province, or country whose laws will govern the contract and any potential legal disputes that may arise from it. 

By including this section, both parties understand which legal system will oversee the interpretation and enforcement of the agreement – providing clarity and predictability in the event of legal issues. It’s essential to consult with legal counsel to determine the most appropriate jurisdiction and applicable laws based on the location of the parties and the contract’s nature. After all, legal requirements may vary widely from one jurisdiction to another.

Recommendation that They Consult with an Attorney

Last but not least, recommend that the independent contractor consults with his or her own attorney. Contracts can be complex legal documents, and having an attorney review the agreement helps in identifying potential pitfalls – ensuring that it complies with relevant laws and regulations, and protecting the interests of both parties. 

This recommendation emphasizes transparency, fairness, and the importance of informed consent, helping to prevent disputes or misunderstandings down the line. It also underscores the seriousness of the agreement and encourages responsible and ethical business practices – ultimately contributing to a more trustworthy working relationship between the client and the contractor.

Can You Ask an Independent Contractor to Agree to Non-Compete and Non-Solicitation?

In some cases, you can ask an independent contractor to agree to non-compete and non-solicitation clauses as part of their independent contractor agreement. While these clauses are common in certain employment contracts, they do have their limitations. 

The enforceability of non-compete and non-solicitation clauses can vary by jurisdiction. As such, it’s essential to ensure that such clauses are reasonable in scope, duration, and geographic coverage to increase the likelihood of enforceability. 

When including these clauses, make sure they are clear and specific in defining what activities are prohibited – e.g., competing with your business or soliciting your clients – and for how long. Consulting with a legal professional to draft these clauses and reviewing applicable state or local laws is advisable to ensure that they comply with legal requirements and restrictions in your jurisdiction. 

It’s also important to note that including a non-compete or non-solicitation agreement in your contract could blur the lines between employee and independent contractor. This could result in adverse legal action taken by the contractor, your state, or the federal government. In some states like California and Oklahoma, non-competes are expressly illegal.