a. How to Properly Document the Relationship
A written contract should be concluded. The terms of the contract should reflect the characteristics of an independent contractor relationship as identified above, for example it should, if possible, state that:
• the contractor is an independent contractor and not an employee and that the parties do not intend their relationship to be one of employment;
• the contractor is free to control and organize his / her own manner of working and his / her working time;
• payment is be based on specified deliverables/results being achieved;
• the contractor is free to contract with and do work for other companies, etc.
• it should avoid terms generally associated with an employment contract and relationship, such as any provisions relating to employment-type benefits, references to ‘employment’, salary, wages, leave, etc; and
• the nature of the services, the apportionment of risk, remedies in the event of breach and liability for tax should be clearly and expressly provided for.
b. Day-to-Day Management of the Relationship
In light of the fact that the true nature of the relationship is determined with reference to the day to day reality of the relationship, not just the terms of the contract, it is import-ant for the principal to ensure that the independent contractor is not in reality treated as an employee. The management of the day-to-day relationship must be consistent with the contractual arrangements. Practically, therefore, the level of control exercised over the independent contractor should be limited and care should be taken not to unduly limit the independent contractor’s ability to contract with other entities. The principal should give the contractor as much independence as possible.