Why Have Independent Contractor Agreements?achkarlaw-admin
The topic of independent contractors is commonly discussed in the employment law. Unlike employees, independent contractors do not have rights under employment standards laws such as Ontario’s Employment Standards Act, 2000 (“ESA”). However, independent contractors, also known as freelancers, enjoy greater freedom in choosing their clients, setting their work hours, and deciding on their work location and other aspects.
Given these differences, it becomes crucial for independent contractors to establish written agreements with their clients. Such agreements play a vital role in clarifying the terms of the business relationship and can prevent future issues.
This article will outline what you need to know about being an independent contractor, the rights of independent contractors, and how a good independent contractor agreement can provide some of the protections that employment law cannot.
Who is an Independent Contractor?
An independent contractor, essentially, is someone who is in business for themselves. They provide some sort of service or goods to another party as a business, and will often serve multiple clients at once. Unlike the relationship between an employer and an employee, the client will not have substantial control over the independent contractor’s behaviour or decisions about how the work is done. Clients only care about the finished product or service. However, it is not always easy to determine who is an employee versus an independent contractor.
The distinction between an employee and an independent contractor is not always clear-cut due to a range of factors that need to be considered. These factors can include the level of control exercised over the worker, the nature of the work relationship, the degree of independence in how the work is performed, the ownership of tools and equipment, the method of payment, and more. Courts and authorities often assess these elements collectively to determine the accurate classification. It’s important to recognize that this determination involves a case-by-case analysis and may involve legal expertise to ensure proper classification under the applicable laws and regulations.
It is also important to keep in mind that independent contractors are different from dependent contractors, who rely on a single client for most of their income. However, it is still a good idea for dependent contractors to look into signing agreements with their clients to avoid issues.
What Rights Do Independent Contractors Have?
Independent contractors can make their own work hours, determine their own pay, take the time off that they need, and otherwise manage their own business. There is a great deal of freedom that can come with being an independent contractor.
However, with this freedom comes the tradeoff of not retaining the same protections afforded to employees by the ESA. Independent contractors do not need to be given notice of termination, severance pay, vacation pay, overtime pay, or any other benefits or protections typically accorded to employees.
What independent contractors can do, instead, is enforce a contract. In their case, they would enforce their independent contractor agreement with their clients.
How Can Independent Contractor Agreements Help?
An independent contractor agreement is a contract between the contractor and the client that will clarify terms of their arrangement. It can be used to determine how much the contractor is paid, how long they will work for their client, and many more details that might otherwise be in question. An independent contractor agreement adds a level of protection that the contractor might not otherwise be able to rely on. It can prevent misunderstandings and potential issues if you ever need to go to court.
It is important to make sure that your independent contractor agreement is thought-through and drafted correctly. An employment lawyer can help you figure out the best possible way to protect yourself through this very important document.
What Should I Include in My Independent Contractor Agreements?
Independent contractor agreements can be difficult to word, but they are very important when entering into a business arrangement. An employment lawyer can help you find the best way to work your agreement and ensure that you do not run into trouble later, but in general, agreements should include:
The length of your agreement
Contractors usually have fixed employment dates which will depend on how much work a client needs done or how long a particular project will take. It is a good idea to agree and set terms about how long your business relationship will last when drafting your agreement.
Pay and Compensation
Speak about how much you charge and how much your service to your client will cost beforehand. It is always good to include pay in the agreement, to save yourself from misunderstandings and legal action around money later.
Types of Services
The agreement should cover what the contractor will and will not provide as part of their service to the client.
If there is a need for confidentiality regarding the service that is provided, you should include terms around that. The client and contractor should both know what should and should not be shared.
Unlike employees, independent contractors do not get the benefit of reasonable notice or termination pay if their client decides to end their contract. It might be a good idea to prepare for this, just in case, with a clause that determines what happens if the contract is ended early. It is also a good idea to prepare for when the contract is ended because the services have been provided.
Control Over Services
An independent contractor may decide to outsource parts of their work or change the manner in which work is done. Employees, on the other hand, are often controlled in their work environment by their employers. Agreements should include details about the contractor’s ability to outsource work and change up their style.
Indemnification and Insurance
These can protect you from potential issues around negligence, mistakes, or other issues that might arise.
If you are registered to collect GST/HST, or are required to register, then you should mention that you will be collecting these taxes from your client, and also get their HST number.
Terms about changes to work or other necessary items
Exactly what is included in the agreement will greatly depend on what work is being done and what terms are important to cover.
Independent contractors are different from employees, as they do not work solely for a single company, they determine their own work hours and functions, and they will often have multiple clients at the same time.
However, with the freedom of being an independent contractor comes the drawback of not being protected by employment laws like Ontario’s ESA. Since independent contractors do not have the ability to rely on the ESA, it is a good idea for them to make sure that they are protected by an independent contractor agreement.
If you are looking to begin drafting an agreement or if you want to know more, make sure to contact a qualified employment lawyer who can help you draft an agreement that will have you feeling secure.