Independent Contractors before Contracts, Oooops!
In the PSC Train Blog this week we have been discussing "prevention" steps for Independent Contractor risks. Today we are going to address a seemingly innocent operational convenience that can have deep legal and cost consequences.
We encounter many times when organizations find out, after the fact, that a independent contractor is working on premise without the proper corporate documentation. When this occurs the company works to get the proper paperwork in place after the assignment has begun. Sometimes due to the urgency of the work, the contractor is engaged immediately with the promise of paperwork to follow. So, what's the big deal?
Well it turns out that when a contractor is asked to complete and execute paperwork outlining terms and conditions of their assignment after they have been engaged, that documentation can be deemed null and void by the courts because it was completed after the engagement took place. The contractor could contend that it was signed under duress. Meaning that if they didn't sign it they might have lost that the assignment and the revenue. They could contend that some of the terms and conditions, like non-compete, non-disclosure, were unknown to them and therefore unenforcible by law.
There are a slew of exposures that can be caused by operationally putting the "kart before the horse". So, what's the solution?
First, don't let this happen. Create a policy whereby a contractor cannot be engaged or arrive to perform any work until all paperwork is completed and verfied. This isn't always optimal but it might be better than the legal and cost alternative. Educate offenders of this policy.
Secondly, you can provide the contractor "consideration" for signing the document. While the laws vary by state, provice and federal jurisdictions. Most legal advice will direct that by paying the contractor a nominal sum of money in consideration for signing the contract post assignment, the effect is that the contractor was compensated for the contractual considerations and therefore, the contract is valid and thus the terms enforcible.
As with many things in life, something so simple or small can be very dangerous. Check in with us next week while we explore more news and prevention strategies in the world of employer of record services.
NOTE: We strongly recommend that you consult your legal counsel on the proper activities before your institute any of the recommendations in this post. These are merely operational guidance.