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Independent Contractor Agreement

Everything you need to know about getting an Independent Contractor Agreement on Goodlawyer: pricing, scope of work, benefits, and frequent questions.

  1. What is an Independent Contractor Agreement?
  2. Who is it for?
  3. Pricing and Scope
  4. What is the Process?
  5. How will my business use an Independent Contractor Agreement?
  6. What risks will this protect my business from?
  7. Frequently Asked Questions
  8. Book an Independent Contractor Agreement

 


What is an Independent Contractor Agreement?

Independent Contractor Agreements, sometimes called Service Agreements, are legal contracts that define the terms between a business and an external contractor or service provider.  A tailored Independent Contractor Agreement is critical to formalizing your business relationships and establishing expectations. These agreements outline terms such as the work to be done and who can perform the work, compensation structures, and who owns any intellectual property produced.

It’s important to make sure that Independent Contractor Agreements are drafted so that they do not accidentally create an employee-employer relationship, as this will place additional obligations and liabilities on the employer.

Who is this service for?

This service is for businesses looking to outsource specific work or projects to independent contractors or service providers, rather than using employees. It is also for businesses or individuals looking to provide specific services to a customer as an independent contractor, not as an employee.

Your Good Lawyer will advise you on whether the worker should be classified as an employee or independent contractor.

Pricing and Scope

Independent Contractor Agreements can vary drastically, which means the complexity of the Independent Contractor Agreements and therefore the price varies as well. At Goodlawyer, part of our mission is to always provide upfront fixed prices for legal services, so we've created a basic and complex Independent Contractor Agreement to give business owners more choice and more control.

 

Basic ($480 + Tax)

$400 legal fee + $80 service fee

Suitable for:

  • Independent contractors providing simple, non-essential services that pose a low risk of liability to either party.

  • Early-stage companies seeking to retain independent consultants for a fixed term.
  • Simple consulting services with non-essential importance or low risk of liability to the Company.
  • Companies with compensation payable in $/hour served or in a lump sum payment. 

Includes:

  1. Client intake meeting
  2. Employee vs independent contractor assessment/classification
    1. Lawyer will evaluate the proposed relationship to confirm that the worker is an independent contractor, not an employee or dependent contractor.
    2. Lawyer to advise on the implications of this classification.
  3. Description of independent contractor engagement for limited scope of work
    1. Recitals evidencing intention of the parties
    2. Fixed term of work (i.e. time-based)
    3. Schedule, place of work determined by contractor (i.e. control over work)
    4. Contractor responsible for providing tools/facilities (i.e. ownership of tools)
    5. Contractor responsible for deductions from pay
    6. Contractor responsible for remitting GST/PST/HST
    7. Clarify the contractor is not eligible to participate in the hiring party’s benefit plans etc.
    8. Clarify contractor required to do their own pay deductions
  4. Nil or limited representations/warranties from contractor regarding performance of services
  5. Simple schedule outlining scope of consulting services, including deliverables, compensation, deadlines etc.
    1. Where customization efforts exceed medium threshold, the Independent Contractor Agreement moves to Complex Tier
  6. Simple termination provisions
    1. i.e. Termination for convenience
  7. Inclusion of certain client specific "standard" provisions
    1. Lawyer to limit customization and inclusion of relevant practical law "standard" provisions within low to medium customization threshold:
      1. Standard IP assignment to the hiring party;
      2. Confidentiality/non-disclosure provisions.
    2. Where customization efforts exceed medium threshold, the Independent Contractor Agreement moves to Complex Tier
  8. One round of minor revisions.

Where customization efforts exceed the "basic" threshold, the Independent Contractor Agreement moves to the Complex tier outlined below.

Complex ($960 + Tax)

$800 legal fee + $160 service fee

Suitable for:

  • Independent contractors providing complex, essential services that may pose a higher risk of liability to the hiring party.

Includes all service elements from the Basic Tier. Inclusion of any of the below criteria will make a matter 'complex':

    1. Term of work based on completion of a project (or indefinite term)
      1. Requirement for contractor to issue a notice of completion, or the hiring party to issue an acceptance certificate.
    2. Customization requested by hiring party indicates willingness to assume increased risk of potential employee classification:
      1. Indefinite term of work;
      2. Use of hiring party’s tools/facilities;
      3. Hiring party to have greater control over working conditions (place of work, hours worked etc.);
      4. Some expenses to be paid by hiring party;
      5. Restrictions on who a contractor may work for, if they can work for other clients.
    3. Robust representations/warranties from contractor regarding performance of services
      1. Tailored to risk.
    4. Complex schedule outlining scope of consulting services, including deliverables, compensation, etc.
      1. Payment is a fixable amount but not lump sum
      2. Payment schedule based on installments or clearly defined milestone achievements
    5. Ability for consultant to sub-contract services
    6. Invoice dispute procedure is specified.
    7. Inclusion of provisions allowing interest charges and/or ability to suspend performance if fees remain unpaid within certain time after becoming due.
    8. Indemnification and/or limitation of liability provisions
    9. Complex termination provisions
      1. i.e. Termination on conditions precedent
    10. Inclusion of certain client specific customized provisions
      1. Lawyer to limit customization and inclusion of relevant practical law "standard" optional provisions within medium to high customization threshold:
        1. Non-solicitation provisions;
        2. Requiring the contractor maintain liability insurance;
        3. Requiring the contractor to have and maintain worker’s compensation insurance.
      2. Where customization efforts exceed high threshold, the Independent Contractor Agreement is suitable for a custom price quotation

    Where customization efforts exceed the “complex” threshold, a custom price quotation is suitable. Your lawyer will always seek your approval on custom quotes before proceeding — no surprises.

     

    Other Considerations

    • If you are already using an Independent Contractor Agreement but want to ensure it’s meeting your business’s needs? Book a contract review with a Goodlawyer at $25 per page to have your Independent Contractor Agreement assessed.
     

    What is the process?

    1. Book a call: Pick a time to discuss your Independent Contractor Agreement with a Good Lawyer. They'll help you determine if you need a Basic or Complex agreement.
    2. Design your Agreement: You’ll have a call with your Good Lawyer to help them understand your business so they can draft an Independent Contractor Agreement that adequately protects you and your contractors.

    3. Receive your Document: You will receive a copy of the Independent Contractor Agreement, ready for use.


    How will my business use an Independent Contractor Agreement?

    Set the right expectations.

    Whether you are providing the services or looking to hire a contractor, an Independent Contractor Agreement will protect both parties. Independent Contractor Agreements create a legally binding contract that ensures everyone is on the same page regarding what work is expected to be done and under what terms and conditions. 

    Increased flexibility.

    Getting a professionally-drafted Independent Contractor Agreement means more options. Your Good Lawyer can open up the door to the use of subcontractors, intellectual property protections, and warranties, among other things.

     


    What risks will this protect my business from?

    Avoid lengthy and costly disputes.

    An Independent Contractor Agreement will provide guidance to both the hiring party and the contractor if any confusion about the relationship arises. For example, how is project completion to be measured? When do payments become due? Is the contractor entitled to any IP rights created throughout the duration of the contract? A well-written Independent Contractor Agreement should clearly answer these questions to avoid lengthy and costly disputes.

    Avoid unintended employment liabilities.

    It’s important to make sure that Independent Contractor Agreements are drafted so that they don’t accidentally create an employee-employer relationship that burdens the hiring party with additional liabilities. For example, employers are liable for meeting minimum employment standards, whereas independent contractors are allowed to contract out of these standards. If a worker is misclassified and an employer-employee relationship is later found, the employer may be on the hook to compensate the employee. A professionally-drafted Independent Contractor Agreement will help ensure that an employee-employer relationship is not accidentally created. Learn more about the difference between Employees and Independent Contractors here.

     


    Frequently Asked Questions

    What if I need multiple Independent Contractor Agreements?

    This service will only cover the creation of one Independent Contractor Agreement. If the agreement is intended to cover various types of services or it will be used repeatedly, you’d be better suited getting a Master Services Agreement (MSA) with a Statement of Work template document. Any time new work is requested, the parties to the agreement will issue a Statement of Work setting out the specific work to be completed. The work completed under that Statement of Work will then be governed by the terms of the MSA. Creating an MSA and Statement of Work template has additional legal costs, but it’s generally a better strategy for businesses who regularly hire independent contractors. Your lawyer will let you know if an MSA is better for your situation.

    What is the difference between a Master Service Agreement (MSA) and an Independent Contractor Agreement?

    A Master Service Agreement (MSA) is a more comprehensive agreement covering the provision of services by an independent contractor to a customer. MSAs are typically used where multiple agreements stemming from the same client or similar related services are required. One MSA is drafted to cover the general terms and conditions of the relationship, while a Statement of Work template is used to outline the expectations and deliverables for each specific project.

    What’s the difference between an Independent Contractor Agreement and a Service Agreement?

    There is no difference between an Independent Contractor Agreement and Service Agreements; these terms can be used interchangeably.

    What’s the difference between an Employment Agreement and an Independent Contractor/Service Agreement?

    Independent Contractor Agreements are tailored for independent contractors, not employees. Independent contractors are typically described as “self-employed” meaning they run their own business. In contrast, Employment Agreements are intended to govern the employer-employee relationship. It’s important to understand the difference between the two because in an employment relationship, employees have different rights while employers have different responsibilities such as tax deductions and employment insurance contributions. Additionally, while you are able to contract out of minimum employment standards with independent contractors (e.g. overtime pay, etc.), those standards always apply to employees. Some signs that you might be hiring an employee and not a contractor include you retaining control over the time and manner in which work is to be done, providing tools for the worker, and covering all associated operating costs on behalf of the worker (e.g. paying for office space or software licenses). Learn more about the difference between Employees and Independent Contractors here.

    Do I need a lawyer in my province for an Independent Contractor Agreement?

    Generally, no. Independent Contractor Agreements do not require the consideration of province-specific employment law, so a lawyer in any province should be able to assist you. However, if your industry has very specific provincial regulations and your lawyer isn’t comfortable drafting your Independent Contractor Agreement, they will let you know and Goodlawyer will set you up with another lawyer who can help.

     


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    Fatima, July 2021 — 5-Star Google Review


     

    Are you ready to start growing your team?

    Book an Independent Contractor Agreement

     

    Your lawyer will assess your situation and make recommendations on which complexity tier you should consider accordingly.

    Still have some questions?

    Book a free Legal Concierge™ service