Beware Overuse of the “Acting as Independent Contractor” Provision

I’d like to report overuse of the “acting as independent contractor” provision.

Here’s the version that makes sense: The parties intend that the Consultant will be an independent contractor. It makes it clear that the parties intend that an individual who is providing services to a company won’t be an employee of the company. (It uses language of intention because whether someone is an employee or independent contractor can’t be set in stone when the contract is signed but instead depends on the relationship of the parties at any given time.)

But check out the version in orange below:

That contract is a transition services agreement between two entities, one of which is being spun off from the other. (Hi there, DTE Energy Company and DT Midstream, Inc.!) Saying that either party might somehow be acting as employee of the other is ridiculous.

The provision in blue is the one to use, if you really feel it necessary. After all, the contract says what it says, and if it in fact creates, for example, a relationship of principal and agent, then the provision in blue isn’t going to change that. But the worst you could accuse the provision of blue in being is unnecessary. It isn’t ridiculous.

So here’s how to remain sensible in how you use an “acting as independent contractor” provision:

  • One of the parties is an individual; the other is someone (in business contracts, invariably an entity instead of an individual) that hypothetically could employ the individual.
  • The provision isn’t mutual. Instead, it relates to the individual not being an employee of the other party.

I’m glad we had this chat.

About the author

Ken Adams is the leading authority on how to say clearly whatever you want to say in a contract. He’s author of A Manual of Style for Contract Drafting, and he offers online and in-person training around the world. He’s also chief content officer of LegalSifter, Inc., a company that combines artificial intelligence and expertise to assist with review of contracts.