Independent Contractor
Agreements
and Sales Agreements Home
  More Reading
 
 
   
 

How An Independent Contractor Agreement, Independent Contractor Contract or Sales Agreement Protects Your Business



When employing individuals as employees, contractors or sales representatives, it is very important to set forth company policies and, in Employee policy statement forms, independent contractor agreement forms, and sales commission agreement forms are available for purchase here from our Recommended Site.

 

INDENDEPENT CONTRACTOR AGREEMENTS AND SALES AGENT AGREEMENTS

 
 


Independent Contractor Agreements and Sales Agent Agreements should contain certain terms outlined below.

  The Difference Between Employees and Contractors
 


Companies often try to save money spent on benefits by hiring contractors instead of employees. Whether a worker is an employee or contractor in relation to legal obligations under federal and state tax and benefits laws, is not clear-cut and is based on numerous factors balanced by courts:

 


  • If the work is done on the company premises

  • Who provides the tools and resources to complete the work

  • Who controls the work and work product

  • Duration of the relationship

  • Skill required

  • Whether the hiring party has the right to assign additional projects

  • The hired party's discretion over low long and when to work

  • The method of payment

  • The hired party's role in hiring and paying assistants

  • Whether the work is party of the regular business of the hiring party

  • Whether the hiring party is in business

  • Whether or not benefits are provided

  • The tax treatment of the hired party

In determining whether a relationship was employment or contract, the court will weigh the above factors to make a determination.

Obligations to Employees vs. Contractors:

Obligations Employee Contractor
Required relationship time minimum None unless otherwise stated in an agreement None unless otherwise stated in an agreement
Agreement required No No
Agreement recommended by author No Yes
Required to deduct taxes Yes No
Insurance covers acts of Yes No, usually
Liable for acts legally Yes in performance of employment Usually no, but depends on degree of control and circumstances


  Employee Policies
 


The purpose of company policies for employees is to give notice and to set uniform treatment and instruction for employees on performance and behavior at the work place. Generally, it is a good idea to have employees sign the end of the policy statement or another document stating that they have received this information and that they agree to it. It is important to present the information in the initial hiring session to be sure that it is legally effective as a binding agreement.

It is important to carefully draft and periodically review the company policies to be sure that they reflect the actual actions and procedures of the company. A company's failure to follow its own policies can cause very bad legal results.

  Typical Policy Provisions: Employment is At-Will
 
The Policy should include a statement notifying the employee that employment is at will and that his or her duties, promotion or demotion, salary, relocation and all items regarding work are at the discretion of the employer.

  Typical Policy Provisions: Notice of Inappropriate Acts
 


The Policy should include a statement instructing the employees not to engage in criminal acts, not consume or be "high" on drugs or alcohol at work, not to use the company resources and equipment, including email and the phone, for harassing, criminal, defaming, political, personal or sexual acts.

The Policy should include a statement defining sexual, race, disability and religious harassment , how to report it and how the company handles the reports.

  Typical Policy Provisions: Handling of Confidential Information
 


The Policy should include a statement to employees of their exposure to the confidential information of the company and third parties, what kinds of information are confidential and employees' obligation not to disclose or personally use confidential information, during and after employment, and the employee's agreement to this.

  Typical Policy Provisions: Ownership of Work Product
 


These may include the following or other warranties:

The Policy should include a statement to employees that all of the product of their work and all intellectual property rights in that work, is owned by the company and not to be used by them personally outside work or by their future employers.

  Typical Policy Provisions: Non-Compete and Solicitation
 


Some policies include agreement by employees not to solicit employees to leave the company and work elsewhere for a certain time period following employment.

Some policies include agreement by employees not to work for competitors of company. Non-compete clauses are regulated in time period by state law and in scope of industry and/or geography through case law.

Be aware that employee agreements or policies that are too restrictive or unreasonable will be rewritten or thrown out by courts. However, for the many employees who either do not know or do not have the funds to hire an attorney, the policies may be an effective deterrent nevertheless. On the flip side, be aware that onerous employee policies and are a strong negative to educated and talented employees and word will spread among them.

  Contractor Agreements and Sales Agent Agreements
 


The primary purpose of a contractor agreement or sales commission agreement is to ensure that an individual who is a contractor is aware of his or her obligations, that the parties agree on the services to be performed and the amounts to be paid, and that the company owns the work product. While companies may choose, unwisely, to operate without any employee policies, failing to have a contractor agreement can be worse because the contractor, by law, owns her own work product unless otherwise set forth in a writing.

  Typical Provisions: Services
 


It is important to clearly define the services to be performed and any deadlines for work product or performance. Failure to clearly define what is to be done can lead to each party, even in good faith, having different ideas and not discovering this until the work is completed and the company is not satisfied. The more detail stated in the contract about the relationship, the less risk of misunderstanding later.

  Typical Provisions: Payment/Commission
 


The agreement should include a provision that states how much the company is going to pay the contractor and the procedures for payment. If hiring a sales agent, it is very important to set forth whether the commission is a percentage of net or gross revenue, how those figures are defined and which sales are covered for commission. For example, if the agent is to receive a percentage of revenue received -- important since you don't want to pay until you get paid -- and he signs the customer before leaving but the customer pays after he has left the company, does he get paid?

  Typical Provisions: Relationship
 


The agreement should include a provision that clearly states that the relationship is not employer-employee and that none of the benefits or tax results typical to that relationship apply.

  Typical Provisions: Others
 


These agreements should have confidentiality, inappropriate acts, ownership of work product and non-compete and non-solicitation provisions similar to those discussed above.



  Typical Provisions: Reps and Warranties
 


Representations and warranties in the agreement may include:

  • That the contractor will re-perform defective or non-conforming services for a time period indicated;

  • That the contractor is a US citizen or authorized to work in the US;

  • That the contractor will not infringe third party rights in performing services or commit any illegal acts; and/or

  • That the contractor is not violating any other agreement by performing services.

  Typical Provisions: Indemnification and Term
 



A provision stating that the contractor or agent will indemnify the company for any breaches of the warranties. Indemnification means that the contractor has to pay the company for any litigation costs resulting from her breach of the warranties.

A provision that regarding how long the contractor will perform the services and how the either party may end the relationship.



Conclusion

When employing individuals as employees, contractors or sales representatives, it is very important to set forth company policies and, in the case of contractors, have a written agreement.

Employee policy statement forms, independent contractor agreement forms, and sales commission agreement forms are available for purchase here from our Recommended Site.


Readers are cautioned not to rely on this article as legal advice as it is no substitution for a consultation with an attorney in your jurisdiction. Based on jurisdiction and time, the law varies and changes.

2003-2010 Coollawyer Inc. All rights reserved.