Check a contractor agreement online before you sign
Independent contractor agreements straddle a line — too much employer-like control and you're an employee in disguise. Green Flagged checks every clause for the patterns that create classification risk, IP traps, and unfair termination.
8 red flags we look for in contractor agreements
Hours, location, and tools controlled by client
Indicators of employment misclassification — increases your risk and the client's.
Exclusive engagement
Independent contractors should be free to take other clients. Exclusivity rarely survives a classification audit.
Non-compete after termination
Hard to enforce against contractors and a misclassification flag.
All-IP-assigned including pre-existing work
Carve out pre-existing IP via a schedule and retain a license for ongoing reuse.
Indemnity uncapped or excluding the contractor's cap
Contractor's indemnity should be capped at fees received.
Termination for any reason with no notice
Without a notice period, you can be cut off mid-project with no pay for completed-but-uninvoiced work.
Expense reimbursement with vague approval rules
Expenses should be pre-approved or covered by a fixed allowance.
Background check / NDA obligations binding the contractor's contractors
Reasonable for sub-contractors; unreasonable as a blanket clause.
What to read in this contractor agreement
Status as independent contractor
Explicit non-employee status, no benefits, no withholding. Reality has to match the words.
Services and deliverables
Specific outputs, specific timeline, specific acceptance. Hourly with NTE cap, or fixed-fee with milestones.
Payment
Net 14 ideal, Net 30 acceptable. Invoicing cadence. Late-payment interest.
IP ownership
Work product to client on final payment; pre-existing IP retained by contractor with a non-exclusive license to client.
Confidentiality
Mutual obligations, defined term (2-5 years), standard carve-outs.
Termination
Notice period (usually 14-30 days), payment for work-to-date, return of materials.
Frequently asked about contractor agreement
What makes a contractor agreement risky from a classification standpoint?
Client control over hours, location, tools, and methods; exclusivity; long-term engagement with no other clients; integration into the client's organizational structure. The IRS, HMRC, and EU member states each have their own multi-factor tests.
Should I assign all IP to the client?
For work-product IP created during the engagement, yes — but exclude pre-existing IP and reusable tools via a schedule. Retain a license for the contractor's own ongoing use where possible.
Can the client impose a non-compete after the engagement ends?
They can try, but post-engagement non-competes against independent contractors are largely unenforceable and increase misclassification risk for the client. Negotiate to remove or narrow significantly.
What payment terms should an independent contractor accept?
Net 14 with milestones. Net 30 is the upper limit. Anything beyond Net 30 is the client treating you as a financing vehicle.
Does the agreement need to specify hours?
It should specify deliverables and milestones, not hours. Hour specifications signal employment-like control and increase classification risk.
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