Independent Contractor Agreements. Why do I need to sign them?

[Harold Mansfield]

I've always had a problem with this. 9 out of 10 clients pay me for a product that has a set price.
Every now and then someone insists that I sign an independent contractors agreement...and it's usually after the job is done.

I'm my own company. They are not hiring me to work for their company in any capacity as any kind of employee.
So why do I need to sign an independent contractors agreement with them?
I'm already paying taxes on all of my income.

I have been an IC before on projects so I know the drill. But a set product with a set price does not fall into that category.

Do they make office depot sign an IC agreement every time they buy printer paper? Dell builds computers on demand. Do they make Dell sign one when they order a new Computer? No. Because it's a set product at a set price. They aren't hiring Dell to build a computer. They are buying a computer from Dell. Isn't that just a business expense?

Help me understand this, I honestly don't see why I'm obligated to do this for anyone that I don't work for as an employee.

[Brian Altenhofel]

It depends.

Are you set up for corporate-to-corporate transactions, or are you an individual? If you're an individual, they are needing something for their records that shows that you absolutely understand that you are working for them as an independent contractor and not as an employee. Some insurance companies require employers to submit affidavits from individual independent contractors affirming that the contractor understands he is not an employee and therefore not eligible for benefits so that the contractor can't come back and claim benefits in the event they (or perhaps the IRS) decides the contractor really should have been classified as an employee. They don't need that when doing corp-to-corp.

[Harold Mansfield]

It depends.

Are you set up for corporate-to-corporate transactions, or are you an individual? If you're an individual, they are needing something for their records that shows that you absolutely understand that you are working for them as an independent contractor and not as an employee. Some insurance companies require employers to submit affidavits from individual independent contractors affirming that the contractor understands he is not an employee and therefore not eligible for benefits so that the contractor can't come back and claim benefits in the event they (or perhaps the IRS) decides the contractor really should have been classified as an employee. They don't need that when doing corp-to-corp.

They're buying a product from me. I don't see how this applies. I've had this conversation with the IRS and they assured me that I do not have to be listed as anyone's Independent Contractor in this situation. So when I get attorneys trying to tell me I have to do it, it's a little irritating.

I do work for a coupe of agencies throughout the year on an "on call" ongoing basis and I can see why they would require this. But not from someone who is buying a one time product. It's always attorneys. I never get asked to sign these things from anyone else, and I've dealt with companies and organizations large and small. Seriously, it's less than 1% of the time.

This particular contract has some other issues though. Mainly that the job is already done, and there is language in it about my responsibilities after the fact, and some things that were never agreed to. It was that which made me suspect of the entire document in the first place.

However, we talked and I think understand that I'm not signing anything about work that is already done. Those terms were already set and agreed to. However going forward, we can talk.

[Brian Altenhofel]

Mainly that the job is already done, and there is language in it about my responsibilities after the fact, and some things that were never agreed to.

On the rare occasion I've gotten those, I just refer them to my attorney. 99% of the time, they don't bother following up with him.

As for the "product", with it being a custom one-off product it gets kind of blurry, especially on larger projects. It's pretty much a CYA document. Typically, the insurance companies who are the real force behind wanting it signed. The company might even be contractually obligated by another party (such as their insurer) to obtain that document.

If it contains language that could be construed as applying retroactively, you should have your attorney make sure that the language is absolutely clear that the language does not go into effect until the date of signature (or another date explicitly agreed upon in the document).

[tallen]

Are they buying a tangible, physical product from you, or are they buying in intangible that ultimately is the result of a service that you provide?

It's not just the feds, but the state government as well. The default assumption for both is that any person I pay for services provided is my employee unless I can demonstrate otherwise. This applies not just to income taxes, but also my liabilities for worker's compensation and unemployment contributions (both state issues).

If you are not incorporated, (in my state) I am supposed to submit paperwork to the worker's comp. board to get pre-approval to treat you as an independent contractor rather than an employee.

In practice, if I am writing the check payable to a company name rather than to your personal name, I don't bother. But if I am going to make the check payable to you, I have to (for my own protection, ultimately is shows up when my worker's comp insurance audits the payments (e.g. payroll) upon which my premium is based).

edit: don't know how this applies to your situation with the attorney, but perhaps they are just more aware of and sticklers for following the rules?

[Harold Mansfield]

Are they buying a tangible, physical product from you, or are they buying in intangible that ultimately is the result of a service that you provide?

It's not just the feds, but the state government as well. The default assumption for both is that any person I pay for services provided is my employee unless I can demonstrate otherwise. This applies not just to income taxes, but also my liabilities for worker's compensation and unemployment contributions (both state issues).

If you are not incorporated, (in my state) I am supposed to submit paperwork to the worker's comp. board to get pre-approval to treat you as an independent contractor rather than an employee.

In practice, if I am writing the check payable to a company name rather than to your personal name, I don't bother. But if I am going to make the check payable to you, I have to (for my own protection, ultimately is shows up when my worker's comp insurance audits the payments (e.g. payroll) upon which my premium is based).

edit: don't know how this applies to your situation with the attorney, but perhaps they are just more aware of and sticklers for following the rules?

That's not the case. I'm not just some guy they hired to do piece work. I'm a company that they purchased a product from, just like any other.
I know the argument. My rebuttal is that you aren't doing business with some guy. You called a company. I'm no more your independent contractor than Dell is when they build the computer that you order.

The fact that I appear to be a one man show has no bearing on it. They didn't hire or pay Harold Mansfield the person, they hired and paid a company.

And like I keep saying, the job is done. I'm not signing an IC full of terms after the fact. That is something that should have been discussed when terms were being discussed and agreed to, not after.

The big issue with this is, these IC agreements are stacked with terms where they try to determine how I am to run my business. And that's not happening. I already have a Terms of Service. It doesn't change into YOUR Terms of Service just because you purchased something from me. And I know that's the game because I actually read them when they send them.

You'd be amazed at some of the stuff that people try to get you to agree to, and take responsibility for, without actually hiring you to do them. Things like "Top search engine placement", Specific traffic levels, "continuing SEO". It's ludicrous.
That's why I don't sign them. Because even though they are far and few in between....they are usually trying to pull a fast one.

Most people just send you the W9 and be done with it. But not lawyers. Layers send you a 5 page Independent Contractors agreement that makes you responsible for the success of everything online. Now I ask you, if I was stupid enough to be roped into that, why would you think that I'd be smart enough to do the work in the first place?

[Brian Altenhofel]

The fact that I appear to be a one man show has no bearing on it. They didn't hire or pay Harold Mansfield the person, they hired and paid a company.

It can have a bearing if you are a sole proprietorship or single member LLC.

[Harold Mansfield]

Turns out that he agreed with me and had a misunderstanding of what my duties were at the moment. We agreed to just go with a straight non disclosure, non compete, and let the terms of service on my website serve as is.

We also agreed that if I am to be listed as an IC, that a straight IRS W9 form without all of the clauses would be fine.

[Business Attorney]

Harold, you might save yourself some grief in the future by putting a simple statement in your terms and conditions specifying that you are an independent contractor.

I assume you wrote your own terms and conditions and there are a few things an experienced attorney would have put in. The language on independent contractor is one of those "miscellaneous" terms that we are known for sticking into contracts (which is what "terms and conditions" are intended to be). There is a reason for much of our boilerplate, believe it or not.

[Harold Mansfield]

Harold, you might save yourself some grief in the future by putting a simple statement in your terms and conditions specifying that you are an independent contractor.

I assume you wrote your own terms and conditions and there are a few things an experienced attorney would have put in. The language on independent contractor is one of those "miscellaneous" terms that we are known for sticking into contracts (which is what "terms and conditions" are intended to be). There is a reason for much of our boilerplate, believe it or not.

It appears I have some business restructuring to do all around.