What is a 1099 contractor agreement?
A 1099 contractor agreement is a contract between the contractor and the company, outlining the contractual relationship between the parties. A few examples of provisions that may be included in a 1099 contractor agreement are as follows:
A list of services to be performed by the contractor.
This provision should include a brief outline of the work the contractor is expected to perform. Depending on the pre-existing relationship (if one exists) between the contractor and company, the nature of the work to be performed, and whether the contractor and employee have also entered into an MSA (Master Services Agreement), this provision may be more or less specific.
Fees, Expenses and, Scheduling
A definition of the relationship between the parties. (contractor-client relationship as opposed to an employee-employer relationship)
Choice of venue/choice of law provision
Provisions addressing the assignment of obligations and termination.
Why do I need an attorney to help me draft a 1099 contractor agreement?
There are several reasons to consult an attorney prior to hiring a 1099 independent contractor and presenting them with an agreement. Though, like almost any kind of contract these days, the internet is full of forms and examples for contractor agreements, the consequences of entering into these agreements without consulting an attorney can be costly.
Outlined below are just a few of the considerations that the attorneys at DZ Law will walk you through if you're considering hiring an independent contractor.
Do I even need a 1099 agreement or an employment agreement?
This question is perhaps the most important consideration when thinking about entering into a 1099 agreement. Often, employers are unaware of the specific conditions that make a worker a 1099 contractor as opposed to an employee. The best way to determine if a worker is an independent contractor or employee is to consult a licensed attorney. There are several factors that need to be considered, and the law governing worker classification varies somewhat by state. Though it may seem simple, the consequences of misclassifying workers are serious and can put a large financial strain on your company. The factors to consider in determining if a worker is an independent contractor or an employee in Tennessee are:
(a) The right to control the conduct of the work;
(b) The right of termination;
(c) The method of payment;
(d) The freedom to select and hire helpers;
(e) The furnishing of tools and equipment;
(f) Self-scheduling of working hours; and
(g) The freedom to offer services to other entities.
What should be included in the agreement?
Like any other contract, an independent contractor agreement should contain the standard provisions. For example, recitals, choice of law/forum, and a counterpart provisions will likely be found in any independent contractor agreement.
Certain provisions, however, are unique to independent contractors agreements for example the agreement should contain a provision that identifies the person performing the work (the contractor) as a 1099 contractor as opposed to an employee. This provision may also list any training the contractor will undergo at the direction of the company. Though the contractor likely is a professional and should not be required to do any lengthy training, if some training is required it will likely be listed here.