Independent contractors make good business sense in a number of situations. However, without the proper precautions in place, businesses may find themselves in litigation, as they attempt to address issues they previously thought had already been addressed. However, many times, we find ourselves litigating issues that could have been prevented with a solid contract between the independent contractor and the company.
Failure to Adequately Detail Performance Requirements
Particularly when people have worked together before, a business owner and a contractor may forgo the traditional independent contractor contract. However, business owners do so at their peril. Without a written contract detailing expectations, business owners may find themselves in litigation. All too often, the litigation involves a dispute about performance requirements. Will the contractor be paid based on output? Must the contractor deliver a completed project prior to payment? Or is payment based on the time the project takes, such as an hourly wage or weekly or monthly rate? What happens if unforeseen circumstances arise? A well worded independent contractor agreement addresses these issues. This assures all parties are on the same page regarding each party’s expectations on these very important issues.
Failure to Adequately Detail Work Product Ownership
If a contractor develops a business method in connection with their work, does the business method belong to the contractor or the company? What about a product the contractor designs? What if the product has more than one practical application? Does the company own the patent or does the contractor? There is no “right answer” to these questions. However, the contract must include a clearly defined answer to these questions, particularly if the product or idea developed is lucrative. Without a written contract detailing the expectations of both the contractor and the company, extensive business litigation may ensue.
Failure to Detail Any Non-Solicitation Policy
Business owners must ask themselves how they feel about independent contractors poaching company employees. If you oppose allowing independent contractors the opportunity to meet your employees, essentially audition them over the course of the contract, then hire them away from you, you need an independent contractor agreement clearly prohibiting such conduct. You should also cap the amount of time, post contract, the non-solicitation agreement applies. A word of caution, courts are unlikely to uphold a permanent ban on soliciting company employees for employment. Consequently, you should speak with a qualified business attorney about appropriate language for your specific situation.
If You Are Considering Hiring an Independent Contractor
If you are considering hiring an independent contractor, contact an attorney. They can provide you with up front guidance, putting the tools in place to reduce the potential for litigation later. If, instead, you find yourself facing business litigation, an experienced litigation attorney can help you.