If you are planning on doing work for a company as a contractor, there are some issues that you should consider. Firstly, you need to ensure that you are a proper contractor, for both tax purposes and under employment law. There are many obvious differences between employees and contractors, so it should be easy for you to figure out which one you are, but we are happy to advise if you are unsure.
It is important that you appreciate the lack of entitlements you have a contractor as compared to an employee, but also note the advantages of being a contractor, such as that the business has a lot less control over your work. It is important to review any consultant, contractor or independent contractor agreement given to you by the company you are working with before signing and starting work for them.
Pay and Expenses
The first issue you should make sure the contractor agreement covers is the method and timeframe in which you will get paid for your work. The contractor agreement should set out methods of invoicing and the payment terms. The agreement should also set out in detail the fee schedule for the particular kind of work you are doing, for example, your hourly rate for design work or consultancy. If there is travel expenses or other costs involved in providing services for the business, the agreement must also set out how these will be reimbursed.
How Work is Allocated
The contractor agreement should also identify the term of the relationship, the services you will provide and if applicable, the time and length of any projects you will be working on. This should also set out how projects or clients will be assigned to you as well as the process for not taking on projects if you are not available to work.
Superannuation and Insurance
As a contractor you may be eligible for superannuation contributions in certain circumstances, you can also take a test to determine whether superannuation will be applicable in those circumstances.
Insurance is also an important issue to consider as a contractor. Typically the business you are working with will not cover your insurance. Regarding workplace health and safety, this should also be covered in the agreement. You should review the terms of the contractor agreement to see what your obligations are and how you will be protected when working at your chosen location e.g. home, or at a client office or the business’s main office.
One of the most important clauses to carefully review as a contractor is the intellectual property clause. Employees typically assign the intellectual property they create during their employment. However, as a contractor, this is typically negotiated between the parties, and you should ensure that you understand your rights over the intellectual property you create.
The two different clauses will usually apply is that either the intellectual property you create will be licensed to the business, and you will retain ownership, or you will assign the intellectual property you create but maintain ownership of the intellectual property of the work you had created before you started work with the business. In some circumstances, you may be assigning the intellectual property to the particular client you are working with for example if you have finalised a design for the client.
Another important clause to review thoroughly is the termination clause, which should set out how both parties can terminate the agreement. This is important to review as you should have the opportunity to terminate the agreement if you no longer want to work with the business.
As a contractor, you’ll want to make sure that you can collaborate with other businesses during the term of the agreement to keep your options open. Most contractors agreements will include some form of a non-compete clause. This may include both a non-solicitation clause and non-competition clause. A non-compete clause will stop you from competing with the business where as a non-solicitation clause will restrain you from soliciting clients, former employees and suppliers. Upon reviewing restraints, it is important to be aware that these clauses may or may not be upheld by the courts if they are found to be unreasonable to protect the business interests of the business or confer too heavy a burden on the former contractor.
Usually, these clauses will not restrict you from working with competitors because this may stop you from working in your chosen field. However, it’s very common to include restrictions on soliciting clients of the business or its employees. Restraint clauses in a contractor agreement are often reviewed quite differently to those in employment agreements, as they should usually be less restrictive than employment restraints.
Understanding your obligations and rights upon agreeing to a contractor agreement is important so that you can review and amend any clauses you are not happy about. If you have any concerns or questions about your contractor agreement, you should speak with an experienced contract lawyer who can review your agreement and let you know if there is anything that should be removed or amended.