Creating an Attorney Independent Contractor Agreement

The Basics of Independent Contractor Agreements

An independent contractor agreement is a contract between an individual and an organization that outlines the terms of their agreement for the provision of services. The independent contractor agreement is a common contract that encompasses numerous fields and jobs. This agreement recognizes the contractor as self-employed and does not include the contractor as an employee of the business. In comparison, an employee agreement is a contract made between an employee and an organization to lay out the terms of employment. The employee agreement covers the expectations between the employee and employer. It typically includes elements such as employment duration, salary, reimbursement of expenses, hours to be worked, confidentiality, and termination.
Many businesses use these contracts in lieu of traditional employment contracts. The benefits of an independent contractor agreement include:

• Avoidance of employment law violations, as the contractor will not be considered an employee.
• Freedom from financial liability for the contractor’s debt obligations and malpractice, since the contractor is self-employed.
• Freedom from many employee benefits laws, including Obamacare and housing or child-care benefits.

Specific benefits for an attorney using an independent contractor agreement include:

• Income tax benefits . The business owner can take deductions for both the payment of the individual’s salary and the expenses involved in the work, including travel and the cost of the work performed.
• Control over the outcome of legal matters. The layoff or payment structures can be customized to incentivize attorneys to perform efficiently.
• Control over workflow by being able to hire attorneys "as needed." Moreover, professional liability may be reduced or avoided.

While there are many advantages to attorney independent contractor agreements, there are risks involved in classifying a worker as an independent contractor rather than an employee. If the IRS decides that you have misclassified your employees as independent contractors, you can face tax liabilities, penalties, and fines. If misclassification is discovered under the Fair Labor Standards Act (FLSA) or the Employee Retirement Income Security Act ("ERISA"), then the business could be on the hook for unpaid overtime compensation, benefits costs, insurance, and workers’ compensation. Misclassification can result in damages under both the FLSA and California Business and Professions Code (the Unfair Competition Law). A misclassification claim could involve anything from loss of clients to awards of several years’ worth of unpaid wages and benefits, attorney fees and costs, and statutory damages.

Key Attorney Contractor Agreement Clauses

A well-written independent contractor agreement should provide for all the contours of the working relationship. While each clause of such an agreement has significance, there are several provisions that should be included.

1. Scope of Work

The scope of work section should contain a clear and concise description of the work to be performed by the independent contractor. It should also set forth the time frame for completion of the work and any milestones to be met pursuant to the contract. Additionally, pursuant to a statute of frauds, any oral understandings, promises or agreements for a period greater than one year must be in writing and signed by both parties in order to be enforceable. As a practical matter, it serves no purpose to have a lengthy contract if the end result of our legal relationship will occur sooner than set forth in our written agreement.

2. Payment Terms

Payment terms must be clearly defined. In particular, payment terms should be set forth based on the type of services to be provided. For example, is payment to be made on an hourly basis, a flat monthly fee or a percentage of fees collected? Depending on the type of work performed, you may also want to set forth any retainer deposit requirements. It is wise to have a retainer agreement, but all retainer agreements are not created equal. Your attorney independent contractor agreement may contain a retainer provision, but it is prudent to have an independent retainer agreement that sets forth how long the retainer must last, conditions under which the retainer can be held, how unearned amounts will be refunded, and other similar provisions.

3. Confidentiality

As a result of the attorney-client privilege, a law firm independent contractor who has access to confidential information and client records may be required to maintain confidentiality with respect to such matters for a period of time following the termination of the relationship. Depending on the jurisdiction, the obligation not to disclose confidential information may end at some point in the future. You should seek the advice of counsel when deciding how long the post-employment obligation not to disclose or use confidential information should survive the termination of the employment relationship. If applicable, such a provision should be set forth in the agreement. It should also make clear that no medical information, trade secrets or confidential client information obtained in the course of the relationship will be disclosed except as required by a court order or subpoena. Any materials or documents of any kind relating to any current or former client must also be returned (and not retained by the independent contractor) upon termination of the relationship. Note: It may not be appropriate to include a non-compete or non-solicitation provision in an employment agreement containing the attorney-independent contractor relationship. Non-compete and non-solicitation provisions may be regulated by professional responsibility rules.

4. Termination

In any independent contractor relationship, the parties should be clear on how to terminate the relationship and the consequences of such termination.

Legal Implications and Statutory Compliance

When drafting an independent contractor agreement with an attorney practitioner, there are certain legal considerations and compliance requirements to be mindful of. One of the most noteworthy is federal tax implications. In order to be classified as an independent contractor or a self-employed individual, the recipient of legal services must meet definitive tests to confirm that he/she is not an employee of the firm providing the legal services. The IRS has made it clear that if the firm exercises too much control over the worker, the worker is likely an employee. This is important because if the IRS and/or state taxing authorities find that the arrangement is actually an employer-employee relationship, the firm could be required to pay withholding and payroll taxes on the income paid to the worker, the firm could face penalties for misclassifying the worker as an independent contractor and the worker could face a tax liability if he/she is not prepared to pay self-employment taxes as an independent contractor.
Although a firm may consider an independent contractor relationship appealing, there are also state-specific regulations to consider. Some states impose restrictions on the use of independent contractors in general or in certain industries. For example, New York limits the use of independent contractors for telemarketing purposes. Similarly, Connecticut prohibits the use of independent contractors for telemarketing unless the telemarketer has met statutory requirements for doing business in the state as an independent contractor. This means it is necessary for firms to comply with both federal and state requirements when drafting the attorney independent contractor agreement. Firms should also be aware that some states impose post-termination covenants and choose to make those restrictive covenants enforceable only if certain requirements are met. For example, New York requires that an employment agreement which includes a post-termination restrictive covenant must advise the worker to consult an attorney prior to signing the agreement. An employer that does not provide this written notice waives its right to injunctive relief and "other relief" (likely meaning lost profits) for breach of the post-termination restrictive covenant. Although this is a New York state law, given the frequency with which lawyers move around we recommend all restrictions have the notice.

Common Mistakes

In an attempt to save a few bucks (or perhaps engage in a little ego-massaging), some lawyers spend a lot of time creating the Attorney Independent Contractor Agreement from scratch. In most cases, this does nothing short of ensuring that their document is littered with fatal flaws. These can include:
A. Misclassification of Employee/Independent Contractor – Depending on the state where the agreement is being invoked, the tax authority will apply California’s 8-factor test, the federal IRS test or the less voluminous, but still potentially fatal, IRS 20-factor test (see further description of all three of these tests in this article.)
B. Duty-Breaking Provisions – A lawyer who claims to have a duty to "fill the phone booth" or have an office assistant at all times may be surprised by how many jurisdictions are willing to hold that the lawyer has broken the duty of confidentiality to clients and thus cannot enlist the help of independent contractors.
C. Time Requirements – Imposing a work schedule or number of hours can create an employer-employee relationship.
D. Indicators of Control – Requiring the IC to wear particular clothing (like a suit) or mandating exact billing formats can create the appearance of control.
E . Scope Limiting/IC Exclusions – As one court noted, a lawyer cannot cut out certain areas of practice and still qualify an "independent contractor" arrangement. The problem may not arise from this being in the agreement, but rather that the Court can easily determine how often the independent contractor is engaged in these "excluded" areas of practice.
F. Requiring Joint Representation Without Informed Consent – A lawyer cannot joint represent Client A and Client B without both clients’ informed consent; if the independent contractor is representing clients of the firm while he/she is working for the lawyer, it goes without saying that informed consent may be difficult to obtain.
G. Conflict Waivers – As with most commercial waivers, courts are reluctant to enforce conflict waivers that are not readily discussed with the client. Further, some courts won’t enforce traditional language that allows one party to waive the conflict.
H. Arbitration Clauses – in numerous cases, arbitrators have determined that arbitration clauses should go in the retainer agreement, not the employment agreement. As a result, many lawyers have fallen afoul of this simple requirement and have found their IC arbitration clauses unenforceable.
I. Conflicts with Bar Rules – Some Bar rules dictate how lawyers can and cannot work together. This may overlap with other items on this list.

Tailoring for Legal Services

Once a firm selects an independent contractor agreement, it’s time to tailor it to the specific situation. Note the following points which may be relevant to legal services:
Type of Services:
The specific services required will affect the level of control required.
General counsel – this is generally an employee-like relationship requiring close supervision and control. An employer-employee relationship might be better.
Contracted legal services – Generally, an independent contractor agreement will suffice if the attorney is hired as an independent contractor to perform legal services at a client’s facility, or over the phone or at the contractor’s office, but with a clause indicating full control of the work product.
Retained as an expert witness – An attorney hired as an expert witness is usually an independent contractor but should require an expert witness agreement rather than an independent contractor agreement.
Control of the work product: (applies to all types of legal services, but especially general counsel):
The controlling factor is whether the law firm keeps tight control over the work that the attorney does:
Drafts: A draft of a legal document is preferable to an oral report. The independent contractor agreement could specify that the attorney shall provide drafts of all his research and reports prior to finalization.
Copies of advice provided in the firm’s name: All correspondence should be copied to the firm of record when the attorney is providing advice on a matter, and the agreement can specify that this be done as a matter of course.
The intent of the attorney for hire: In general, an attorney who has a contract to provide legal services for one agency/department of a firm, warning signs might be raised if the attorney is hired for legal services outside that department. The firm might not have sufficient control over the advice being provided to other departments.
Billing: The firm should assume responsibility for all billing unless it clearly intends to allow its contracted attorney to bill for his services.

Template for Attorney Contractor Agreement

[Date] [Attorney Name]
[Attorney Street Address]
[Attorney City, State, Zip]
Re: Independent Contractor Agreement
Dear [Attorney Name]:
This letter confirms the terms of your acceptance of the offer of employment that has been extended to you by [Law Firm Name] ( Company or the Firm or we or us or our). As we have discussed with you, your position at the Firm will be as an independent contractor attorney. Your duties will include performance of all duties necessary to represent clients of the Firm in any and all matters. Your employment is contingent upon your execution of this Agreement contemporaneously with your execution of other legal documents required for us to establish your independent contractor status and your completion of all forms required under applicable law.
Such a position entails a relationship between you and the Firm, which in all respects is that of an independent contractor and not that of employer and employee. We shall control only the results of your services, not the means by which you produce these results. You are required to work for the Law Firm in the regular or customary business hours of a law firm, as may be established from time to time. We may change these business hours upon notice to you. You will be bound by the rules, regulations, and policies of the Law Firm, as may be established and modified from time to time.
We expect that you will diligently fulfill your responsibilities and devote all of your professional time, attention, skills, and efforts to the performance of your duties hereunder in an efficient, trustworthy, and loyal manner. At all times, you shall act in the best interests of the Law Firm. You agree to devote yourself to the business of the Firm and to perform the duties and responsibilities of your employment faithfully, competently, and to the best of your ability. You agree that the Law Firm may at any time at its convenience and for any reason or none terminate the relationship. This letter will evidence your understanding that the Firm will have no liability whatsoever to you or your heirs , representatives, or estate for compensation, benefits, or otherwise after the termination of this letter.
In consideration of the above, you will be paid on a basis agreed upon or contracted between you and the Firm for your services. Compensation will be paid on a bi-weekly basis. Your compensation will be determined in the sole discretion of the Firm. In addition, you will be reimbursed for reasonable business expenses in accordance with the Firm’s policy respecting travel, meals, lodging, and other entertainment expenses. The Firm maintains total discretion over whether or not to reimburse you for particular expenses, and any questions regarding particular expenses should be made to [Applicable Person].
You agree and acknowledge that if, on the date of expiration or termination of our relationship with you, you have no clients you cannot represent, then and in these circumstances, you shall surrender to us all files and/or property of the client(s) and we shall pay you the amount of outstanding and any previously unpaid compensation owed to you. If, on the date of expiration or termination of our relationship with you, you do have client(s) you cannot represent, you agree to represent us in negotiations regarding who shall thereafter represent such client(s) and in connection therewith, you agree to use your best efforts to maintain the representational status of those client(s) and/or the collection of the balances due to us from those client(s) and, further, you agree to cooperate fully with us in negotiating any new retainer agreement that may be necessary in order to transfer the representational status of a client(s) to another attorney once it has been identified whether that attorney is an employee of ours or a liquidating partner.
You have read the above and understand its contents and meaning, and by your signature below, you accept and agree to the terms, conditions, and provisions thereof.
Sincerely,
[Law Firm Name]
By: _____________________________
Its: ________________________________
AGREED TO AND ACCEPTED THIS _______ DAY OF ___________________________ .
[Attorney Name]
By: _____________________________
Independent Contractor