Independent Contractor Agreement

Drafts a results-oriented ICA that survives IRS and state misclassification scrutiny while protecting both parties on IP, confidentiality, and liability.

Prerequisites

Gather before drafting:

Parties — legal names, entity type/state of formation, addresses, authorized signatories
Scope — deliverables, milestones, acceptance criteria, start/end dates
Compensation — fixed fee, hourly, retainer, or milestone-based; reimbursable expenses
Governing state — determines applicable classification test (ABC vs. economic-realities)
IP sensitivity — pre-existing contractor IP vs. novel work product
Insurance — coverage types and minimums for the engagement

Agreement Sections

1. Parties and Recitals

Legal names, entity type, formation state, address
Confirm signatory authority (board resolution / operating agreement if entity)
One-sentence engagement purpose

2. Scope of Services

Specific deliverables with measurable acceptance criteria
Milestones and deadlines
State explicitly: contractor controls manner, means, method, and schedule
List exclusions to prevent scope creep

3. Compensation and Payment

| Element | Requirement | |---|---| | Rate/fee | Exact amount or formula | | Invoicing | Contractor submits invoices; net 15/30 | | Expenses | Itemized reimbursables; receipts required | | Taxes | Contractor solely responsible (federal/state/local + self-employment) | | No withholding | No income tax, FICA, FUTA, or state UI withheld | | 1099-NEC | Hiring party issues 1099-NEC; no W-2 | | Late payment | Interest rate or penalty if applicable |

4. Contractor Classification

Include affirmative statements that contractor:

Retains full control over manner and means of performance
Provides own tools, equipment, and workspace (note exceptions)
May work for other clients concurrently
Bears risk of profit or loss
Receives no employee benefits (health, retirement, PTO, workers' comp)
Is not supervised or subject to set hours

Jurisdiction-specific tests:

| Framework | Test | |---|---| | Federal/IRS | Common law control (behavioral, financial, relationship type) | | FLSA | Economic realities | | CA, NJ, MA + others | ABC test — Part B (outside usual course of business) is highest risk |

5. Term and Termination

| Trigger | Notice | |---|---| | Without cause | 15–30 days written | | Material breach (uncured) | Written + 10-day cure; immediate if uncurable | | Insolvency/bankruptcy | Immediate |

On termination: deliver work in progress, return property, submit final invoice. Hiring party pays for accepted work through termination date.

6. Confidentiality

Scope: trade secrets, business strategies, customer lists, financial data, proprietary processes, anything marked or reasonably understood as confidential
Duration: 2–5 years general; indefinite for trade secrets
Carve-outs: publicly available, independently developed, received from third party, legally compelled (with prompt notice)
Return/destroy all materials on termination

7. Intellectual Property

Use belt-and-suspenders approach:

All deliverables are works made for hire under 17 U.S.C. § 101 — verify eligible category
Fallback assignment of all right, title, and interest (worldwide, perpetual) for anything not qualifying as WMFH
Contractor executes additional documents to perfect ownership
Pre-existing contractor IP listed on Exhibit A; non-exclusive license granted for use as embedded in deliverables
Moral rights waiver for copyrightable creative works

8. Representations and Warranties

Contractor: authority to contract, no conflicting obligations, possesses required skills/licenses, work meets professional standards, deliverables non-infringing, compliance with applicable laws.

Hiring party: authority to contract, reasonable cooperation, timely information.

9. Indemnification and Liability

| Party | Indemnifies against | |---|---| | Contractor | Breach, negligence/willful misconduct, IP infringement, bodily injury/property damage | | Hiring party | Breach, negligence/willful misconduct |

Liability cap: total fees paid (carve-out for confidentiality/IP breaches)
Exclude consequential, incidental, punitive damages (same carve-outs)

Contractor insurance minimums:

| Type | Minimum | |---|---| | Commercial general liability | $1M occurrence / $2M aggregate | | Professional liability (E&O) | $1M per claim | | Workers' comp (if contractor has employees) | Statutory |

Require certificates of insurance; hiring party named as additional insured on GL.

10. Dispute Resolution

Escalation: good-faith negotiation → mediation (30 days) → binding arbitration (AAA Commercial Rules)
Seat: governing state; fees split equally; each party bears own attorneys' fees
Governing law and exclusive venue for non-arbitrable claims: governing state courts

11. General Provisions

Entire agreement / merger clause
Written amendments signed by both parties
No contractor assignment without consent; hiring party may assign to successors/affiliates
Severability; no waiver by failure to enforce
Notices via email + overnight courier
Force majeure (exclude payment obligations)
Counterparts; e-signatures valid under ESIGN Act / UETA

Signature Block

Both parties sign with name, title (if entity), and date.

Pitfalls and Checks

Never use supervision language — avoid "direct," "supervise," "report to," "schedule set by" — these flag misclassification
California ABC test: Part B (core business work) is near-impossible to satisfy; recommend separate CA counsel review
Non-competes: void/restricted in CA, MN, ND, OK; limited enforceability elsewhere — assess before including
Multi-state work: identify all states where services are performed; each may apply its own classification test
Never guarantee IC status: include disclaimer; recommend client consult tax counsel
Gig/platform engagements: verify current NLRB independent contractor standard