3 Considerations When Drafting Contracts in the Gig Economy

 Posted on August 09, 2024 in Business Law

As the gig economy continues to evolve, one of the key areas of focus for gig employers is contracts. Agreements between workers and companies should address the unique characteristics of the gig economy, such as:

• Flexible work schedules
• Project-based pay
• Independent contractor classification

Because gig businesses tend to hire more workers than conventional companies, there is often a more "conveyor-belt" approach to the hiring process. In some cases, this means the business does not establish a relationship with a worker as a company does with a full-time employee. It is crucial, therefore, for a gig company’s contracts to be strong and airtight so that it can be as protected as possible when hiring in bulk.

This article will discuss three important considerations when drafting contracts in the gig economy. The key to having a well-crafted employment contract is hiring an experienced Illinois contract lawyer.

Freelancers vs. Employees

Companies should be careful to classify gig workers as independent contractors, otherwise known as freelancers. There are a few advantages to this:

• A business is usually obligated to offer benefits to its employees but not to independent contractors.
• In some cases, a company is liable for the conduct of its employees. If an employee causes an injury or damages during work, for example, the business may be liable to compensate the victim. If the worker is an independent contractor, however, the company is not usually responsible.
• Freelancers often have no right to collect unemployment insurance or workers’ compensation.

Freelance Worker Protection Act (FWPA)

In August 2023, Illinois Governor J.B. Pritzker signed the Freelance Worker Protection Act (FWPA), which set certain guidelines for contracts between companies and independent contractors (with some exceptions):

• There must be a written contract.
• The contract must include both parties' names and contact information, a detailed list of all products and/or services to be provided, the deadline by which the business will pay the contractor, and the deadline by which the contract must provide the product or service.
• A company has up to 30 days to pay an independent contractor once the product or service has been provided.

Non-Exclusivity

Many freelancers contract with multiple companies. If you hire an independent contractor, he or she is likely to also have contracts with other businesses. If any of those contracts have hired the worker on an exclusive basis, meaning that he or she may only provide such a product or service for that company, it could cause legal complications on your end. Make sure the contract contains an assurance that the worker has not been hired exclusively anywhere else.

Contact a Wheaton, IL Contract Lawyer

There are many more legal factors to consider when hiring in the gig economy, which is why you should retain an experienced DuPage County, IL contract attorney to draft the right agreement for your business. At NN Legal Group, our excellent attorneys are skilled at creating robust contracts that provide our clients with strong protection. Schedule a free consultation by calling 630-474-0925 today.