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3. How to Structure an Independent Contractor Relationship

a. How to Properly Document the Relationship

In order to avoid the confusion between a civil professional relationship and an employment relationship the most important thing is having a clear contract between the individual performing the independent activity and the beneficiary. The contract has to clearly state that the individual contractor is not subordinated when performing the specific activity for the beneficiary, this being a major issue in analyzing the relationship between the two parties.

Also for tax purposes, the parties need to properly document the fact that in performing the independent activity the individual meets at least 4 of the 7 criteria stated in the legal definition of independent activities. Also the individual has to keep financial and tax records according to legal provisions.

As stated previously, there are only a few rules in concluding a valid civil contract, but this does not mean that finding a proper form for such a contract is an easy thing. The Romanian Civil Code states that in every area that a special type of contract is regulated, special rules stated for that contract must apply. So a valid civil contract between the beneficiary and an independent contractor does not have to allow for the possibility of the re-interpretation of the contract as being a special type of contract – in this case an employment contract.

This distinction must also apply to the activities conducted for the beneficiary – meaning that the activities conducted by independent contractors usually are not activities with a permanent and constant character and are different from the current activities that employees are conducting for the beneficiary.

The control over the activities conducted by the independent contractor is circumscribed to the contractual provisions, meaning that every disagreement regarding the activities conducted must be settled according to these contractual provisions or in court.

b. Day-to-Day Management of the Relationship

In the day-to-day operations the individual performing independent activities for the beneficiary has to remain independent, meaning that the beneficiary can only use contractual clauses in order to control the way the individual performs the activity and cannot interfere in the way the individual performs the activity. The beneficiary cannot issue orders for the independent contractor and cannot directly sanction the indepen-dent contractor for the way he performs the activity (with the exception of any existing sanction clauses that need to be constructed in a way that ensures the independence of the individual performing the activity).

Any questions

Ask our member firm Magda Volonciu and Associates in Romania