Independent contractor agreement

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Independent contractor agreement

  1. 1. Prepared By: Page 1 of 10 Michael Carabash Independent Contractor Agreements DISCLAIMER: Please note that the information provided in this DL Guide is NOT legal advice and is provided for educational purposes only. Laws are subject to change and without notice. This DL Guide may be outdated. If you need legal advice with respect to drafting, revising, negotiating or resolving a dispute concerning an Independent Contractor Agreement, you should seek professional assistance (e.g. make a post on Dynamic Lawyers). We have Toronto, Ottawa, Hamilton, Brampton, Mississauga and other Ontario lawyers registered to help you. You can contact Michael Carabash directly at michael@carabashlaw.com. Last Updated: March 2010 © 2008-2010, Dynamic Lawyers Ltd. All Rights Reserved. Michael Carabash, B.A., LL.B., J.D., M.B.A. michael@carabashlaw.com Need an Ontario Lawyer? Make a Post. Get FREE Quotes! www.DynamicLawyers.com
  2. 2. Independent Contractor Agreements Page 2 of 10 Table of Contents Who is an Independent Contractor? ............................................................................................................... 3 When are Independent Contractor Agreements used? ................................................................................... 3 Independent Contractor Agreement: Basic Terms ......................................................................................... 4 Introductory Clause ........................................................................................................................................ 4 Background ..................................................................................................................................................... 5 Services ........................................................................................................................................................... 5 Relationship .................................................................................................................................................... 6 Payment .......................................................................................................................................................... 6 Materials and Equipment ................................................................................................................................ 6 Expenses, Taxes, and Withholdings ............................................................................................................... 7 Term and Termination .................................................................................................................................... 7 Confidentiality and Non-Disclosure ............................................................................................................... 7 Proprietary Rights ........................................................................................................................................... 8 Non-Compete, Non-Solicitation, Non-Disparagement .................................................................................. 8 Injunctive Relief ............................................................................................................................................. 8 Indemnification ............................................................................................................................................... 8 General Terms ................................................................................................................................................ 9 Signing ............................................................................................................................................................ 9 About Us ....................................................................................................................................................... 10 Michael Carabash, B.A., LL.B., J.D., M.B.A. michael@carabashlaw.com Need an Ontario Lawyer? Make a Post. Get FREE Quotes! www.DynamicLawyers.com
  3. 3. Independent Contractor Agreements Page 3 of 10 Who is an Independent Contractor? An independent contractor is a person who carries on business as a separate business entity. That business entity could be an individual, a sole proprietorship, a corporation, a partnership, a franchise, joint venture, etc. It doesn’t really matter what legal structure the independent contractor takes. What matters is the relationship between the independent contractor and his, her, or its client (i.e. the person paying the independent contractor for products or services). Unlike an employee, an independent contractor performs the work if it wants to, how it wants to, when it wants to (you get the point). That said, the independent contractor may agree to provide the services in accordance with the client’s rules, policies, procedures, etc. or in consultation with the client or another person. There may also be other minimal standards imposed on how the services are to be performed. An independent contractor generally has multiple clients and its relationship with those clients is (or at least should be) governed by a written agreement. The independent contractor may itself hire other independent contractors or employees to perform the work (unless the agreement says otherwise). Another big difference between an independent contractor and an employee is the lack of legislative protection the former has: no minimum wage, maximum hours, or minimum notice or severance requirements upon termination. Indeed, an independent contractor is generally disengaged or terminated pursuant to the terms of the agreement. When are Independent Contractor Agreements used? Independent Contractor Agreements are used when the parties want to remain separate and specifically want to avoid creating an employment (or other) type of relationship. There are various reasons for this. For example, the independent contractor may want to remain independent because they: Run their own business. Have multiple clients. Decide when and how to do work. Want to deduct business expenses from their taxable income. Own their own tools and equipment. Want to be able to make more money. Michael Carabash, B.A., LL.B., J.D., M.B.A. michael@carabashlaw.com Need an Ontario Lawyer? Make a Post. Get FREE Quotes! www.DynamicLawyers.com
  4. 4. The full DL Guide is available for FREE with the purchase of a Legal Form. Michael Carabash, B.A., LL.B., J.D., M.B.A. michael@carabashlaw.com Need an Ontario Lawyer? Make a Post. Get FREE Quotes! www.DynamicLawyers.com
  5. 5. Independent Contractor Agreements Page 5 of 10 Background This part of the agreement includes information about the context and purpose of the agreement. It leads up to the actual body of the agreement. It’s important to identify here what business the Client is in and what services the Contractor will perform. These will ultimately become defined words – namely, the “Business” and the “Services” – and used throughout the rest of the agreement. The Client will want to define its Business broadly to protect its interests (for example: by including a clause in the Agreement that ultimately prevents the Contractor from competing in the Business). Meanwhile, to limit its restrictions and liabilities, the Independent Contractor will want a narrow definition of the Business. There will definitely be some negotiating here! These things being said, the Services are typically described in a complete and accurate manner and can include both general and specific services. For example, this definition could say: “The Contractor offers professional graphic design services including, but not limited to, website layout design, logo design, photography, etc. (the “Services”)”. Services The main body of the Agreement starts off with the Client agreeing to engage the Independent Contractor to perform the Services from time to time. Using the words “from time to time” means that the engagement just won’t happen when the agreement becomes effective (but could happen at any time during the Term of the Agreement). The Client will typically want those Services to be performed at certain standards – for example, by a qualified, competent, and prudent worker engaged in the Business or according to the Client’s own internal rules, policies, and procedures. See how the defined term “Business” comes up here? Without specifying these minimal standards, the Client may have a difficult time complaining about how the Services were performed later on. Sure, there may be negligence claims which can be raised above and beyond the agreement itself, but adding in provisions such as this can be IN ADDITION to negligence claims and can be more specific or comprehensive. This way, you’re not leaving it up to a judge to try to figure out how the Services were contemplated to be performed by the parties (or a reasonable person) at the time they entered into the agreement. Michael Carabash, B.A., LL.B., J.D., M.B.A. michael@carabashlaw.com Need an Ontario Lawyer? Make a Post. Get FREE Quotes! www.DynamicLawyers.com
  6. 6. The full DL Guide is available for FREE with the purchase of a Legal Form. Michael Carabash, B.A., LL.B., J.D., M.B.A. michael@carabashlaw.com Need an Ontario Lawyer? Make a Post. Get FREE Quotes! www.DynamicLawyers.com
  7. 7. Independent Contractor Agreements Page 7 of 10 Expenses, Taxes, and Withholdings The Agreement should be clear who is responsible for expenses incurred in the course of the independent contractor offering the services. Such expenses include travel, accommodation, meals, equipment (which includes costs associated with acquiring, maintaining, replacing, renting, transporting, insuring, and disposing of equipment), etc. That said, when it comes to taxes and withholdings, it’s customary for the Contractor to be responsible for withholding and remitting its own taxes, CPP, EI, WSIB, etc. (and the costs of procuring those and other benefits). Term and Termination You’ll also want to discuss the term and method of terminating the agreement. In the latter, the Client will typically want to include the concept of Just Cause (e.g. which could include serious misconduct or breach of the independent contractor agreement), which a client can raise to terminate the independent contractor at any time and without the requirement to provide notice or payment in lieu thereof. You’ll also find termination provisions dealing with a party unilaterally ending the contract by simply providing notice or by mutual written agreement. You can, if you wish, add further termination clauses such that the agreement is terminated on the death or bankruptcy of one of the parties, or if one of the parties attempts to make an assignment contrary to the agreement. Confidentiality and Non-Disclosure The Client may want to include provisions dealing with the Contractor’s use and disclosure of any confidential information. It’s best to do this through a separate written agreement, as this can make the Independent Contractor Agreement bulky (i.e. you’ll end up adding 5-10 more pages for a confidentiality and non-disclosure agreement). Remember: if you do end up saying that a separate written confidentiality and non-disclosure agreement is going to be entered into, don’t invalidate it in the Entire Agreement section of the Independent Contractor Agreement by saying that’s there’s no other applicable agreement that is included in the Independent Contractor Agreement! You need to make some room (i.e. identify) for any other agreement that may be included in the parties’ overall relationship – such as a separate written confidentiality and non-disclosure agreement. Michael Carabash, B.A., LL.B., J.D., M.B.A. michael@carabashlaw.com Need an Ontario Lawyer? Make a Post. Get FREE Quotes! www.DynamicLawyers.com
  8. 8. The full DL Guide is available for FREE with the purchase of a Legal Form. Michael Carabash, B.A., LL.B., J.D., M.B.A. michael@carabashlaw.com Need an Ontario Lawyer? Make a Post. Get FREE Quotes! www.DynamicLawyers.com
  9. 9. Independent Contractor Agreements Page 9 of 10 General Terms The end of the Independent Contractor Agreement should include general terms to help fill in certain blanks about the agreement, how it is to be entered into or interpreted, etc. Some of these terms include: Acknowledgments: the parties acknowledge that they’ve read the agreement, understood it, believe it to be fair and reasonable, have had independent legal advice regarding it, and are entering into it freely Assignment: can this be done at all, by one of the parties, by both parties consenting in writing? Amendment: can this be done at all, for example, by both parties consenting in writing? Entire Agreement: i.e. this agreement supersedes all other agreements – whether oral or written – relating to the same subject matters in the agreement Governing Law: which jurisdiction governs the interpretation and enforcement of the agreement? Interpretation: singular vs. plural; masculine vs. feminine, section headings, etc. Severability: in case one provision is struck down and rendered invalid doesn’t mean the rest of the agreement is Survival of Terms: which terms, if any, survive the expiration or termination of the agreement? Waiver: e.g. no failure or delay of a party to enforce or exercise its rights under the agreement constitutes a waiver Signing The final section of the agreement (other than any schedules or exhibits) requires that the parties (or their duly authorized representatives) sign and deliver the agreement. Signing the agreement without delivering it is not enough to make the agreement effective. There must be delivery. While not a legal requirement, it is a good practice that witnesses be present and sign their names alongside the parties’. Also, it is a good practice for the parties to initial their names on the bottom right hand corner of every page. Michael Carabash, B.A., LL.B., J.D., M.B.A. michael@carabashlaw.com Need an Ontario Lawyer? Make a Post. Get FREE Quotes! www.DynamicLawyers.com
  10. 10. The full DL Guide is available for FREE with the purchase of a Legal Form. Michael Carabash, B.A., LL.B., J.D., M.B.A. michael@carabashlaw.com Need an Ontario Lawyer? Make a Post. Get FREE Quotes! www.DynamicLawyers.com

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