international employment law firm alliance L&E Global
United Kingdom

3. How to Structure an Independent Contractor Relationship

a. How to Properly Document the Relationship

Framing the relationship between the client and an independent contractor should be approached with caution, as careful wording is needed to ensure that the contract does not reflect an employment relationship.

Primarily, the wording should reflect the flexibility and reality of the self-employed na-ture of the relationship. Critically though, the parties must ensure that the contract is an accurate reflection of the actual terms agreed between the parties. If it is not and the employment status is challenged, the tribunal will look behind the terms and consider all the circumstances to determine if they are a genuine reflection of the reality of the arrangements. This will be the case even if the contract contains an "entire agreement" clause. Other points to note are as follows:

• the label given to the contract will be important but not conclusive since the issue will be determined objectively;
• the wording should confirm that nothing in the contract prevents the independent contractor from being engaged, concerned or having any financial interest in any other business. To the extent possible, post-termination restrictive covenants such as non-competition and non-solicitation clauses (which are often associated with employee status) should also be avoided;
• it will be helpful to include a clause which properly defines the independent contractor's services;
• a clause, which entitles the independent contractor to send a substitute in their place to continue to provide the services under the contract, is a useful clause which may indicate self-employed status.

b. Day-to-Day Management of the Relationship

Recent case law has made it clear that the everyday reality of the relationship between client and independent contractor should accurately reflect the self-employed status. The presence of any of the elements set by the Ready-Mixture Concrete case (see section 2.1 above) would suggest that there is an employment relationship in place instead and care should be taken to ensure that this is avoided. Substantive factors include:

• whether the independent contractor has the right to decide the price of their services;
• whether the independent contractor can promote, develop and continue to provide services of their accord;
• how fully integrated the independent contractor is in the client's business and workplace;
• whether the independent contractor is expected to provide his own tools and equipment.

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