# Contractor Agreement Playbook

Negotiation guidance for ADVISE mode. Based on Skala ICA template standards.

---

## 1. Scope & Control (Misclassification Prevention)

**Why it matters:** IRS and state agencies scrutinize contractor relationships. Employee misclassification → back taxes, penalties, benefits liability.

### Golden Standard (Skala)
> "Contractor will have exclusive control over the manner and means of performing the Services, including the time, place, tools, and materials used."

### Red Flags (Employee Indicators)
| Indicator | Risk | Fix |
|-----------|------|-----|
| Fixed hours (9-5) | 🔴 High | Remove; add "Contractor determines own schedule" |
| "At Company's direction" for HOW work done | 🔴 High | "Client may provide specifications; Contractor controls methods" |
| Company provides equipment | 🟡 Medium | "Contractor provides own tools" or "may access systems as needed" |
| Cannot work for others | 🔴 High | Remove exclusivity |
| Training required | 🟡 Medium | Remove; contractor already has skills |
| Ongoing relationship vs project-based | 🟡 Medium | Define project scope and term |

### Negotiation Positions

| Preferred (Skala Standard) | Fallback |
|----------------------------|----------|
| "Contractor controls manner and means of performance" | Remove specific hour requirements |
| "Contractor determines own schedule" | "Core hours for meetings only" |
| "Contractor provides own tools and equipment" | "Company may provide access to systems as needed" |
| No exclusivity | "May work for non-competitors" |
| Project-based deliverables | Defined term with renewal option |

---

## 2. Compensation & Payment

### Red Flags
- Net 90+ payment terms
- Unlimited offset rights
- No invoice requirement (looks like payroll)
- Benefits, PTO, equity mentioned

### Skala Standard
> "Payment of undisputed fees is subject to Client receiving an invoice with accurate records of the work performed."

### Negotiation Positions

| Preferred | Fallback |
|-----------|----------|
| Net 30 days after invoice | Net 45 days |
| "Pre-approved expenses reimbursed with documentation" | Expenses included in rate |
| Late fee 1.5%/month | Statutory rate |
| No unilateral offsets | "Offsets for documented breach only, with notice" |
| Milestone payments for projects | Monthly invoicing |

### Provisions to AVOID
- Payment through payroll system
- Benefits (health, retirement, equity)
- Guaranteed minimum hours
- Overtime pay provisions

---

## 3. Intellectual Property

### Skala Golden Standard
> "Contractor irrevocably assigns to Client all rights, title and interest worldwide in any deliverables... including all copyrights, patents, trademarks, trade secrets, and other intellectual property rights."

### Required Elements

| Element | Preferred Language | Why |
|---------|-------------------|-----|
| Assignment scope | "All Work Product created while performing Services" | Broad coverage |
| Rights covered | "Copyrights, patents, trademarks, trade secrets" | Complete IP transfer |
| Moral rights | "Waives enforcement of moral rights" | Prevents future claims |
| Documentation | "Sign documents to confirm assignment at Client's expense" | Enables registration |
| No retention | "Contractor retains no right to use Work Product" | Clear ownership |

### Preexisting IP

| Preferred | Fallback |
|-----------|----------|
| "Contractor will not use third-party or prior IP in Work Product" | License grant to Client: "non-exclusive, perpetual, royalty-free, worldwide, sublicensable" |

### 🔴 CRITICAL: GPL/Copyleft Warning

**Skala requires explicit warranty:**
> "Work Product does not contain any software licensed under GNU GPL, LGPL, or similar 'copyleft' license that would require disclosure, licensing, or distribution of Client's proprietary source code, unless Client has expressly agreed in writing."

**Why critical:** GPL code can force open-sourcing of entire codebase.

---

## 4. Representations & Warranties

### Skala Standard Warranties

| Warranty | Language |
|----------|----------|
| Professional performance | "Services performed in professional manner per industry standards" |
| Originality | "Work Product is original work of Contractor" |
| Rights to assign | "Contractor has full rights to assign Work Product and license Preexisting IP" |
| Non-infringement | "Work Product does not infringe any third-party rights" |
| No copyleft | "No GPL or similar licenses without written approval" |
| Legal compliance | "Contractor will comply with all applicable laws including tax obligations" |

### What to AVOID
- Guaranteeing specific business outcomes
- Absolute warranties ("error-free")
- Warranties beyond Contractor's control

---

## 5. Independent Contractor Status

### Skala Standard Provisions

**Core language:**
> "Contractor is an independent contractor and not an employee, agent, or partner of Client. Nothing in this Agreement creates an employment, agency, or joint venture relationship."

**Required clarifications:**
- No authority to bind Client
- No tax withholding by Client
- Contractor responsible for all taxes
- No payroll taxes withheld
- No employment benefits

### Reclassification Protection
> "If any authority reclassifies Contractor as an employee, Contractor agrees not to claim any employment-related benefits from Client, including retirement, health, disability, bonus, equity, or insurance benefits, whether retroactively or prospectively."

### IRS 20-Factor Test — Key Indicators

**Employee indicators (RED FLAGS):**
1. Company controls HOW work is done
2. Company sets hours/location
3. Company provides tools
4. Worker cannot hire assistants
5. Ongoing (not project-based)
6. Company provides training
7. Full-time requirement
8. Cannot work for competitors

**Risk combinations:**
- Fixed 9-5 + Company equipment + No subcontracting = 🔴 MISCLASSIFICATION RISK
- Core hours only + Own tools + Multiple clients = 🟢 LOWER RISK

---

## 6. Indemnification

### Skala Standard
> "Contractor agrees to indemnify and hold Client harmless from any losses, damages, costs, claims, expenses, or other liabilities (including reasonable attorneys' fees) arising out of any breach of this Agreement."

### Includes:
- Breach of representations and warranties
- IP infringement claims
- Improper use of confidential information

### Negotiation Positions

| Preferred (Client) | Fallback (Contractor) |
|--------------------|----------------------|
| Full indemnification as above | Cap at 12 months fees |
| No cap | Cap at total fees paid |
| Covers all breaches | Limited to IP/confidentiality |

---

## 7. Confidentiality

### Skala Standard
> "During the term and afterward: (i) not use Confidential Information except as set forth in Agreement; (ii) keep confidential and protect from unauthorized disclosure; (iii) not disclose to third parties except as permitted."

### Definition
> "All information disclosed by Client to Contractor, whether before or during the term."

### Standard Exclusions
- Public information (not through breach)
- Lawfully obtained from third party
- Independently developed without reference to CI

### Permitted Disclosure
> "To employees, consultants, agents who need access and are bound by similar confidentiality obligations."

---

## 8. No Conflicts & Non-Solicitation

### No Conflicts (Skala)
> "Contractor will refrain from any activity inconsistent with obligations under this Agreement. Contractor warrants no existing contracts conflict with this Agreement."

### Non-Solicitation (Skala)
> "During Agreement Term and for one year afterward, Contractor will not solicit any person known to Contractor to be an employee, client, customer, or partner of Client."

**Key limitations for enforceability:**
- "Known to Contractor" — limits to actual contacts
- One year — reasonable duration
- Specific persons — not general industry

### ⚠️ Non-Compete Warning
**Skala does NOT include non-compete clauses.** Why:
- Undermines IC status (suggests employment)
- Often unenforceable (especially California)
- Rely on confidentiality, IP assignment, non-solicitation instead

---

## 9. Term & Termination

### Skala Standard
- **Notice:** 5 days written notice
- **Payment:** Pro rata for work performed to termination
- **Survival:** IP, Warranties, Indemnity, Confidentiality, Non-Solicitation

### Negotiation Positions

| Issue | Preferred | Fallback |
|-------|-----------|----------|
| Notice period | 5-14 days | 30 days |
| Payment on termination | All work completed | Pro rata |
| Automatic renewal | No | With 30-day opt-out notice |

---

## 10. Top 10 Provisions to AVOID

Per Skala guidance:

1. **Employee-like control** — specific hours, mandatory office, detailed supervision
2. **Broad non-compete** — undermines IC status
3. **Benefits/employment compensation** — health, retirement, PTO, equity
4. **Contractor retains IP** — without adequate license to Client
5. **No tax protection** — must clarify no withholding
6. **Long non-solicitation** — beyond 1-2 years
7. **No termination rights** — or excessive lock-in
8. **Assignment of Contractor's tools** — should be licensed, not assigned
9. **Vague scope** — "consulting as requested" is problematic

---

## Output Structure (ADVISE Mode)

```
**Overall: 🔴/🟡/🟢**

**Summary:**
- Key issue 1
- Key issue 2
- Key issue 3

**Issues:**
| Priority | Section | Issue | Recommendation |
|----------|---------|-------|----------------|
| 🔴 | X.X | Problem | Preferred: [Skala language] / Fallback: ... |

**Missing Terms:**
- Item vs Skala baseline

**Questions:**
- Clarification needed
```