What is an Independent Contractor Agreement?
An independent contractor attorney agreement is a document outlining the terms under which an individual lawyer or a law firm may act as an independent contractor for another law firm. It is a tool that is often used when an attorney is engaged to work on a temporary or project-based basis for a law firm. By establishing a written agreement between the parties, the terms of this relationship are clearly laid out ahead of time.
An attorney agreement is sometimes also referred to as an "of counsel" agreement. This is a term that is commonly used in circumstances where an attorney is employed on a more permanent basis by a law firm yet maintains a certain degree of independence, perhaps providing specialized expertise for that firm. Another common hypothetical where an attorney agreement would be utilized is in situations where an attorney is employed by a law firm temporarily to cover for a vacationing partner. In many of these types of situations, an individual attorney seeking such an agreement will seek the help of an attorney who has already been through the process , or an attorney who specializes in attorney agreements.
The main legal concern with failing to use an independent contractor agreement is that the IRS and state labor boards impose limits on the relationship between law firms and outside attorneys who provide services for them. This is especially true when those services fall under the protection of the Fair Labor Standards Act. For example, an attorney who works for a law firm but does not pay her taxes, or who claims to offer services at below the minimum wage, or who does not pay unemployment insurance, could find herself on the business end of a lawsuit from the attorney general’s office. Or alternatively, imagine an attorney who provides services to a law firm in the form of research, marketing, or paralegal work. If that attorney is found to be an employee but is not receiving overtime, the attorney may be in violation of the law.
To avoid the consequences of failing to address these issues beforehand, it is very important to put an independent contractor agreement in place early on. A clause in an agreement that states the mutual intentions of the parties is sufficient to describe the type of independent contractor relationship desired.
Essential Components of an Attorney Agreement
The documents must be clear about scope of work and payment terms. In our experience, the best way to clear up any confusion between you and the attorney is to put everything in writing. The following are the key elements that you want to address in your written document. We have elaborate agreements with some of our lawyers, and very short agreements with others. Regardless of what you choose, be sure to cover all these points:
Scope of Work At minimum, your agreement should spell out what type of cases the lawyer will be responsible for. Will the lawyer call witnesses, take depositions, engage experts, make court appearances and negotiate settlements? That all has to be spelled out in advance or else you may end up spending thousands of dollars on work that may not have even needed to be done at all. On the other hand, make sure that the lawyer understands that you want him to make time to do those things.
When will work be done? You should also discuss the issue of when the lawyer will finish his tasks. You should not have to wait for months on end for the lawyer to do something that may only take a couple of days or weeks.
Payment Terms The biggest source of problems between lawyers and non-lawyer consultants is the issue of payment. Be clear about the rate of pay and whether there will be a retainer. Be careful to talk about and clarify all payment issues in advance of any work.
Restrictive Covenants A good restrictive covenant will keep the lawyer from taking your work in-house and competing with you like a typical legal law firm. Many firms have a restrictive covenant that says that neither the lawyer nor his or her employees can perform similar work for the same client for one year after they are no longer working with the firm.
Confidentiality You want your lawyers to protect your confidentiality as clients, so it is important to establish confidentiality agreements before the issues arise. In many contracts, one party promises to keep the other’s information confidential. But that is often not enough. There should be a clear definition of what is confidential, as well as whether the confidential information can be used for any other purposes. You also need to include the time periods for the confidentiality.
Advantages of Using a Written Agreement
There are numerous benefits for both the attorney and the contractor to execute a written agreement.
It establishes clarity on the role that is to be performed under the agreement.
It protects the contractor from claims that he/she was an employee, particularly if the contractor is claiming unemployment benefits. Likewise, it protects the attorney from a claim by a plaintiff’s lawyer that the contractor was actually an employee and is entitled to wage and hour benefits under the Fair Labor Standards Act or state wage and hour laws. This is particularly important to the extent that plaintiff’s lawyers almost always accept cases on a contingency fee basis and the defense can be very expensive for the attorney in time expense (and certainly reputational expense) even if the contractor eventually prevails in the case. Having a written agreement allows the attorney to recover the contractor’s mis-reimbursed expenses from the contractor via a breach of contract claim.
It establishes the understanding between the attorney and the contractor professionals who will be assisting the attorney in the matter. It is important that the attorney knows his/her expectations, and the understanding of the manner in which the contractor is to provide services, in advance of engaging the contractor or immediately after the engagement begins. This is particularly true to the extent the needs of the attorney change as the matter evolves, and the contractor is not able to evolve their role as needed. Having a written agreement makes it very difficult for the contractor to deny the obligations that were imposed by the agreement. Accordingly, an attorney should not be concerned that a written agreement may impose undue burdens on the contractor, since the contractor will know in advance what is expected of him/her and will have the opportunity to decline or negotiate the terms of the agreement prior to accepting the engagement.
Common Legal Mistakes to Avoid
There are some common legal pitfalls that can arise where independent contractor attorney agreements are concerned, including misclassification and an inadequate specification of duties. These can not only lead to problems with the IRS in terms of misclassification, or with the Ohio state Bar Association for inadequate specification of work and scope of duties, but also in terms of a lack of clarity as to the working relationship between the firm and the attorney.
One common pitfall is to presume that an independent contractor agreement is sufficient. While an independent contractor agreement is helpful, it must ultimately be legally valid. This means that the attorney is truly operating as an independent entity and not as an employee. At its simplest, an independent contractor agreement should be in place if the attorney has general autonomy and is being asked to work on specific legal matters as an independent contractor versus being hired as a firm employee.
For example, an independent contractor attorney who does trial work on a regular basis may be more or less likely to be able to operate under such an agreement than a trust and estates litigator who has only one or two cases at a time. In general, because attorneys typically have different practice areas and thus different needs, personally revolving around that practitioner’s ability to perform (in terms of knowledge and skill) and then to actually complete one or more legal matters, the independent contractor relationship tends to be more viable for trial attorneys than for estate planning attorneys, real estate attorneys, family attorneys, and other such non-litigation attorneys who tend not to be as busy.
Another common pitfall is to have an incomplete specification of duties. Independent contractor agreements should specify the extent of the relationship that is intended. For instance, it is important to have an understanding with the attorney that delineates the extent to which the attorney will be expected to garner business for the firm and maintain a certain level of productivity in that respect through their own efforts. It is also important that there be an understanding with respect to whether the attorney will be interacting with clients directly. A great many independent contractors are not expected to interface with clients directly and in fact do so only to the degree needed to satisfy the client that things are progressing with their matter(s).
The bottom line is that an independent contractor attorney agreement should properly reflect the intent of both the attorney and the firm and the nature of the relationship between the two. An independent contractor contract that is overly vague and non-specific increases the chances that there will eventually be a dispute over the relationship. With any worker, whether employee or independent contractor, the more specificity that can be included as to the rights and obligations of both parties, the clearer things are.
Attorney Responsibilities in Drafting Agreements
An attorney can be invaluable in drafting an effective agreement that will protect both the law firm and the independent contractor lawyer. A well drafted agreement will anticipate possible pitfalls and contain language that conforms with IRS guidelines. Specific requirements must be met for the exemption from employment taxation to apply. If under an independent contractor agreement, the worker is later determined to be an employee by the IRS or other agencies , the law firm will be liable for all federal (Social Security and FICA) and state employment taxes and unemployment compensation. The law firm risks a substantial liability for incurred but unpaid taxes, interest, and penalties on the amount that should have been withheld from the worker’s compensation as well as matching employer taxes.
An attorney should always be engaged to draft an independent contractor agreement as the law firm will receive the benefit of the attorney’s experience in this area, will be covered by a professional malpractice policy, and the attorney will owe the firm a duty and a professional obligation for due care.
When to Seek an Attorney’s Help
The services of an experienced attorney can be invaluable when you want to have an independent contractor agreement reviewed and revised, or create one from scratch. This is especially true if you plan to hire an outside party to work on a project that is vital to the business, or if you have developed intellectual property within the scope of your work relationship. An attorney will take the time to learn about your business and the involved parties so that you can draft the strongest terms possible that identify the rights and obligations of all parties, and then enhance the likelihood they are honored.
For example, the experienced attorney can:
*When to consult an attorney concerning an independent contractor agreement:
-Draft or review a contract that ensures integrity by making it clear that information will only be disclosed as needed for a business purpose, and that after the work is complete, information will be returned, destroyed, and not used afterward.
Updating and Modifying Agreements
Regardless of which agreement is used, do not forget that as a matter of good practice these should be reviewed on a periodic basis and amended based upon any change in the scope of the work, payment, or the law. Consequently, it is important to regularly review agreements and be prepared to negotiate changes with your attorney based upon changes in either the law or nature of the work performed.
Sample Dispute Resolution Clauses
Dispute resolution clauses are often included in an independent contractor attorney agreement, and typically require the parties to submit to mediation followed by arbitration if the mediation is unsuccessful. The prevailing party is usually entitled to recover his attorney’s fees, costs and expenses as well as his damages. The following are a couple examples of good dispute resolution clauses:
Dispute Resolution
15.2 All claims, counterclaims, demands and causes of action between the Parties arising hereunder or out of an engagement agreement shall be submitted to mediation by a neutral third party selected by the Parties. If the dispute is not resolved at the mediation within 30 days following the date the mediator was selected, then each Party may demand binding arbitration before a panel of three (3) arbitrators selected from a list provided by the American Arbitration Association. This Agreement and any engagement agreement entered into between the Parties shall be governed by the laws of the State of New Jersey, without regard to its conflict of laws rules. Each Party shall bear his own expenses and attorney’s fees, and shall bear equally the expenses and attorney’s fees of the mediator and arbitrators.
Alternative Dispute Resolution
15 . 1 To the extent permitted by law, notwithstanding anything to the contrary, except with respect to matters involving intellectual property rights or equity compensation, all disputes arising out of or relating in any way to the Engagement or this Agreement shall be submitted to a hereinafter defined Alternative Dispute Resolution Tribunal ("ADRT") instead of being submitted to a court of law. As used herein, the term "ADRT" means a dispute resolution tribunal created for the specific purpose of resolving, or assisting in the resolution of, the specific dispute; provided that, if the ADRT has not initiated the dispute resolution process within 30 days of the dispute being submitted by one Party to another Party, and the 30-day period has not been extended by mutual agreement of the Parties, either Party may commence the ADR process by selecting and engaging the services of any nationally recognized ADR provider and requesting the ADR provider to select, within 5 days, a mutually acceptable neutral arbitrator with whom the Parties can confer within 10 days to determine whether the ADR provider should or must act as the ADRT. The Parties agree that the following are "prohibited clauses": (a) the designation of a particular person to act as the ADRT arbitrator, (b) the pre-selection of an ADR provider or arbitrator, (c) the designation of the site of an arbitration hearing (any such designation must be done in advance), (d) burdens of proof, (e) burdens of persuasion, and (f) any other clause that is prohibited by statute.