The relationship clause is common in business contracts.
So what exactly is the relationship clause?
It's a clause that clarifies the nature of the working relationship with the other parties to the agreement.
In its most basic form, the relationship clause will make a negative statement that the relationship is not one of employee and employer.
No that’s ok. But in many cases, this is not enough.
Here’s the basic negative relationship clause:
The service providers relationship with the client is not employer and employee.
Below is a more thorough relationship clause.
You are more likely to avoid disputes if you provide detail about what the parties relationship is and what its not.
The relationship clause is important for these reasons:
It clarifies an independent contractor situation so the other party is aware that they have not been hired as an employee and claims employee entitlements.
As a side note - it's not enough to say that someone is not an employee in a contract, then treat them as one off paper. This is called sham contracting and you can get into a lot of trouble for it.
You can avoid a situation where a contractor holds themselves out as being authorised to act on your behalf.
In addition to clarifying that the other party is not an employee, you can avoid any other relationship misunderstandings, by clarifying there is no joint venture or agent relationship.
Although last on the list, exclusivity is a big one. You want to make it clear that you are able to work with other clients if this is the case without being locked into a contract that excludes you from working with others.
Note that one of the hallmarks of a contractor relationship is that the contractor is free to work with others unlike an employee who is bound by the common law duties of loyalty and fidelity.
And if you get a contract that tells you have a contractor relationship but the contract also imposes restrictions on who you can work with, get legal advice. You may want to have that clause revised.
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