If your business hires independent contractors, here are three important tips to help you. First, you should be aware of the difference between independent contractors and employees. Second, signing an independent contractor agreement is a good idea. Third, you may want more agreements or clauses in place to protect your business while you work with independent contractors.
Contractor vs. Employee
Under Texas and federal law, independent contractors are treated differently than employees. Texas law states that employment is “a service performed by an individual for wages under an express or implied contract for hire”, unless “the individual’s performance of the service has been and will continue to be free from control or direction under the contract.” In other words, independent contractors are not subject to the control or direction of a business. Contractors are free to accomplish the tasks for which they are hired in the way they feel is best. Typically they provide their own equipment and set their own hours.
If you work with independent contractors, make sure you are not exercising too much control or direction over their work by consulting with a business lawyer about your practices. Wrongly classifying someone as a contractor when the law says he or she should be an employee could subject your business to legal issues. Take steps to verify that you are properly classifying your hired workers as independent contractors.
Signing a Contractor Agreement
When you hire independent contractors, it is a good idea to require each of them to sign a contractor agreement. A contractor agreement lays out the scope of work that the independent contractor will perform and the rate you will pay him or her. Keep in mind, as discussed above, that you cannot direct or control the contractor in the way they perform the work. As long as they get the work done, they likely have fulfilled the terms of your agreement. Therefore, you may want to be very specific in the contract about the exact scope of work the independent contractor will perform.
One of the reasons that contractor agreements are helpful is that they protect you in case of future disputes. If a contractor tries to argue that you agreed to pay more money or that you did not ask for a certain task to be performed, you can point to the agreement’s language. If you ever need to go to court because of a contractor, you have in writing what you engaged the independent contractor to do. For this reason, be wary of asking independent contractors to perform work outside the scope of their original agreement without signing an amended agreement.
Protecting Your Business with More Agreements
In addition to a basic independent contractor agreement, you may want additional agreements (or clauses added to the contractor agreement) to protect your business. For example, many business owners ask their contractors to sign confidentiality and non-disclosure agreements. These agreements prohibit independent contractors from sharing proprietary company information to which they may have access while working with you, such as client lists or trade secrets. Any time you work with a third party who has the ability to view confidential business information, you run the risk that the third party will share it with others. Requiring your independent contractors to sign these agreements could help mitigate that risk.
If you are curious about additional agreements that could help protect your business, reach out to a business lawyer for assistance. Your lawyer can prepare the appropriate agreements, advise you on their contents, and help you if you need to enforce the agreements.
We’re Here to Advise Texas Business Owners
As experienced Houston business lawyers, the team at Henke & Williams, LLP help our clients find the best solutions possible. We assist local business owners with issues ranging from enforcing independent contractor agreements to getting a business divorce. Call us for business advice right away. To set up a consultation, call 713-940-4500 or use our convenient Contact Form.