Independent Contractor Agreements | Independent Contractor Contract – Part 4 – More Nuances

Sep 24

Independent Contractor Agreements | Independent Contractor Contract – Part 4 – More Nuances

Please note that the information provided herein is not legal advice and is provided for informational and educational purposes only. If you need legal advice with respect to finding an independent contractor lawyer or attorney, you should seek professional assistance (e.g. make a post on Dynamic Lawyers). We have Ontario independent contractor agreement lawyers registered on the website who can assess your business needs and help you draft, understand, negotiate, and resolve disputes involving an independent contractor agreement or contract – I should know, I’m one of them! If you want to speak with me directly, you can contact me at michael@dynamiclawyers.com.

In this blog, I’ll be discussing some additional nuances you should be aware of when it comes to drafting independent contractor agreements and contracts. Be sure to check out my previous 3 blogs about independent contractors: the basics, a general template, and some nuances.

I couldn’t help but want to write more about independent contractor agreements given that I’ve noticed that many large companies have let their employees go but then, a few weeks or months later, want them to come back as an independent contractor (I receive regular phone calls about this situation). What could be wrong with that, you say?

Well, first off, as a true independent contractor (instead of an employee pretending to be an independent contractor), you no longer have the benefits of the employment standards act when it comes to things like minimum pay, maximum hours, notice (in case of termination) or pay in lieu of notice, and severance. Instead, your relationship is dictated by the terms of the contract.

Next, you have to do a lot more record keeping. You should have your files, receipts, invoices, bank statements, credit card statements, and government forms in tip top shape just in case the CRA comes knocking.

Now you have to learn all about directors, officers, shares. You may want to hire a friend or family member. You need to know about the tax implications involved in that (basically, you can only pay what’s fair market rate for the services provided – i.e. fair and reasonable in the circumstances). Perhaps you want to hire employees or independent contractors of your own (you’ll need agreements for that too)? Maybe you have to do some advertising or networking to get more clients…etc…etc… At the end of the day, being your own business, while rewarding in many ways, is not as easy as showing up to work from 9 to 5 and collecting a paycheck with benefits.

So back to the independent contractor agreement, already! it’s a negotiated document, right? Not always! Many times, large companies simply hand over a standard template and say “Sign here Now!” if you want to be hired. What should you do? Succumb to the will of the big company? Why not try to suggest changes? What have you got to lose? Most likely, you’ll be dealing with their lawyers or HR department and they’re used to this kind of thing. The department that wants to hire you says to their lawyer or HR department: “What’s taking so long? We need that person now!” Meanwhile, the lawyers or HR department is trying to put pressure on you to sign a one-sided contract. Should you? Who has the power here? It depends on a number of circumstances, such as how high in demand you are for a given set of skills, experiences, knowledge, etc. Perhaps the large company has a big deal in the works and needs you to start asap. This helps put power in your hands and now you can negotiate effectively.

Sometimes, these companies will want you to be incorporated (which carries with it a lot more paperwork, liability, and responsibility than just being an individual employee). Now you’ve got to establish your corporation (name search, articles of incorporation, by-laws, director and shareholder meetings, director and shareholder resolutions, issuing shares, etc.), file annual returns with the government, file 2 separate income tax returns (provincial and federal), and comply with all of the requirements in statutes, etc. to maintain your corporation (it’s a legal person!).

OK, so once you’ve taken care of the nitty-gritty stuff that’s involved in establishing a corporation, what about the terms and conditions of the independent contractor agreement itself?

Well, let’s talk about some of the standard terms that you’ll find in these kinds of agreements.

Unfortunately (or fortunately for me), these standard agreements are problematic because they are either (1) too vague and uncertain to be enforceable, (2) are missing information (e.g. additional documents referenced therein or standard terms and conditions that should be applied), or (3) completely one-sided. With respect to the latter, remember: an independent contractor agreement is a negotiated document. They want you. You want to work. It shouldn’t be one-sided if you can avoid it. You just need the confidence to know what you want and then ask for it.

There are terms and conditions in the independent contractor agreement that will be in favour of the payer (e.g. indemnifications, limitations of liability, confidentiality, proprietary information, non-solicitation, non-compete, etc.). Ideally, an independent contractor won’t want any terms or conditions dealing with these things, or will want them to be so vague, uncertain, unfair, etc. and/or missing information so as to render them invalid or unenforceable. Then you’ll have terms and conditions which can be advanced in favour of the independent contractor (e.g. pay, nature of the relationship, nature of the services, termination, etc.). I’m not saying that the latter provisions will always be in independent contractor’s favour (this will depend on the negotiation). I’m just saying that an independent contractor can push back on these issues.

Stay tuned for more blogs about independent contractor agreements and contracts…

In case you’re a Client and looking to engage the services of an Independent Contractor in Ontario, look no further:

Independent Contractor Agreement (Client) – No Schedules

This Agreement can be used by a Client who wants to engage the services of an Independent Contractor (e.g. a consultant, a professional, a general worker, etc.) without creating an employment relationship. The “Client” means that this Independent Contractor Agreement favours the Client – for example, through notice, termination, standards of care, and restrictive covenants, etc. The “No Schedules” means that there are no schedules in this particular Independent Contractor Agreement – although some have a Statement of Work or Description of Work, etc. This one does not. There will be different versions of this agreement which favour both the Client and the Independent Contractor and which may include Schedules. Schedules aren’t absolutely necessary. They’re just one way of having an agreement instead of writing things out in the actual agreement, you simply modify the Schedule. Here’s the sample Video Guide that comes with this Independent Contractor Agreement (Client) – No Schedules:

All of Dynamic Lawyers‘ legal forms are lawyer-prepared, simple to read, easy to customize, and only a fraction of the price a lawyer would charge. Also, each legal form comes with a FREE VIDEO GUIDE (watch a useful example of how this legal form can be customized), a FREE DL GUIDE (read helpful information about this legal form), and another FREE DL GUIDE that sheds valuable insight into how legal forms can be challenged. What are you waiting for? Best of all, if you DO need a lawyer and need some legal advice, simply make a post and get FREE quotes from Ontario lawyers focusing on the area of law you require!