Whether engaging an independent contractor or hiring an employee, it is important to have a contract between the parties that includes the key details of the working relationship.
Assuming there are no specific requirements for their contracts, in the U.S., an independent contractor agreement (sometimes called a “Consulting Agreement,” a “Services Agreement” or another title that refers to the relationship between the parties) typically includes the following key terms and provisions:
- A description of the products, services, and work product to be provided by the contractor;
- The contractor’s rate and any other fees or charges for the contractor’s products and services (including how to handle expenses and taxes);
- The term (or duration) of the contract and termination rights of the parties;
- Ownership rights of the parties to the work product created under the contract;
- Confidentiality obligations of the parties;
- Representations and warranties of the parties (provisions in which the parties make certain representations about their businesses, products, or services);
- Provisions about liability and indemnification,
- A provision about the relationship between the parties being that of independent contractors; and
- General miscellaneous provisions like governing law, assignment, and amendment provisions.
Assuming there are no specific requirements for a company’s employment agreements, in the U.S., employers can generally use offer letters or employment agreements along with accompanying documents to document the employment relationship. Offer letters are generally used for “at-will” relationships, where either party can terminate the employment relationship at any time and for any lawful reason. Employment agreements typically have a set length that locks the parties into an employment relationship for that amount of time (unless there is a termination event like a breach of the contract). Both offer letters and employment agreements typically include the following key terms and provisions:
- Start date of employment;
- Location of employment;
- Job title and rate of compensation (either written as an annual rate or an hourly rate);
- Overtime eligibility and overtime rate;
- Target bonus, commission, or other additional compensation amount and terms (if eligible);
- Equity compensation and terms (if eligible); and
- Employment conditions (such as verification of employment eligibility, reference checks, background checks, etc.).
Offer letters and employment agreements are typically accompanied by documents that contain provisions on confidentiality, intellectual property ownership, non-solicitation, non-disparagement, and sometimes non-competition.