Consultant Agreements

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What Is a Consultant Agreement?

A Consultant Agreement (or Consulting Agreement) is a contract between a consultant and his/her/its client that sets forth the terms and conditions that will govern the relationship between those parties – including the type of consulting services that the consultant will perform, and the compensation associated therewith.

Hiring a consultant, rather than a full-time or part-time employee, may have several advantages for the hiring party. For example, hiring consultants, rather than employees, to perform certain tasks enables the hiring party to avoid the considerable tax liabilities and administrative costs that are associated with the traditional employment model. Consultants may also provide the hiring party with access to specialized skills and expertise that may not have been available at a reasonable cost in the job market writ large. However, in order to ensure that the consultant/client relationship is truly beneficial, the hiring party should ensure that it has a Consultant Agreement in place that protects its business interests, intellectual property and other assets.

Consultant Agreement Drafting Tips

In order to reap many of the advantages of the client/consultant relationship (as opposed to employer/employee), it is essential that the consultant is classified as an independent contractor and not an employee. If the consultant is considered an employee rather than an independent contractor, the hiring party would be liable for employee benefits, worker’s compensation insurance, payroll taxes, vacation pay and numerous other costs in connection with the hiring of the consultant in question.

In order to ensure that the consultant will be considered an independent contractor and not an employee, several aspects of the desired relationship should be negotiated in advance and set forth in the Consultant Agreement including, without limitation, providing the consultant with a certain degree of autonomy in terms of limiting direct oversight and allowing the consultant to determine the location, timing and other aspects associated with performing his/her/its services.

In addition, it is advisable that the hiring party opt for a shorter term of service in the Consultant Agreement. The reason for this is that a shorter term enables the hiring party to terminate the relationship with the consultant if his/her/its services are no longer needed, or are not in any way satisfactory.

If the consultant will have access to sensitive, confidential and/or proprietary information, then the Consultant Agreement should contain comprehensive confidentiality and non-disclosure protections. Further, it is advisable that the hiring party include a work-for-hire clause in order to guarantee that any inventions or other work product produced by the consultant in the course of providing his/her/its services will be considered the exclusive property of the hiring party.

A Consultant Agreement should also always include an indemnification clause ensuring that the hiring party will be reimbursed for any wrongful acts or omissions of the consultant. Where the hiring party anticipates a long term relationship with the consultant, it is advisable to utilize statements of work as supplements to the main Consultant Agreement. A statement of work is a short, convenient attachment to the main Consultant Agreement that describes each new task/project to be performed, as well as compensation and other terms associated therewith. Drafting and executing statements of work as part of an ongoing working relationship is easier than drafting a whole new Consultant Agreement for every new task that the consultant will perform.

Please note that this is only a brief overview of some of the legal issues surrounding Consultant Agreements/Consulting Agreement and the consultant/client relationship and, as such, please remember to obtain guidance from an experienced attorney prior to drafting and/or executing a Consultant Agreements/Consulting Agreement.

If you are interested in learning more about this topic or having a Consultant Agreement (or Consulting Agreement) prepared for you, please e-mail us at info@kleinmoynihan.com, or call us at (212) 246-0900.

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