Sample Subcontractor Agreements

What Is a Subcontractor Agreement?

When we first think about subcontractor agreements, the first people to pop out of our minds are basically contractors. Subcontractor agreements should be viewed as a general term because they’re not limited to contractors but are also for other project holders. This type of agreement is a legal contract between a project manager and a subcontractor. The subcontractor assists them in completing a particular project. Subcontractor agreements should then be taken into account when considering a project proposal with workers outside your company.

The agreement will protect you as a project owner and even those who work for you. The reason for this lies in the outline of the work, the timeline, and the expenses given in the agreement. Though it may seem that a subcontractor agreement works only for project managers or contractors, in reality, it can also be beneficial for subcontractors. By carefully reading the provided clauses within the agreement, the subcontractor may willingly decline to risky statements found within the paperwork.

What are the Different Embodiments of Subcontractor Agreements?

As mentioned earlier, subcontractor agreements are not only applicable to contractors. Here are some examples of Subcontractor Agreements applied in construction and in other fields of work:

Construction. Subcontractor agreements in construction is a contract between an independent contractor and a subcontractor. A subcontractor is employed by the general contractor to help complete a project contract. Construction subcontractors usually do electrical, plumbing, carpentry, and other construction work. A service contract should be agreed upon by the client and contractor before a subcontractor is appointed for the job. Moreover, a subcontractor should be informed of the agreement between the client and the contractor before he agrees to the contract. Also, the subcontractor is required to sign a non-disclosure agreement to keep things confidential.Only then will the subcontractor and contractor can begin to talk about the details of liabilities incorporated in the agreement. The payment process should also be specified in this agreement. Moreover, the subcontractor will be authorized to do the work he is tasked to do based on the written agreement.HVAC. This agreement is a contract between a company and one whose job is to take care of a unit for Heating, Ventilation and Air Conditioning. Included in the agreement are the specifications regarding payment, service, information, and etc. An HVAC unit functions to heat or cool up offices, buildings, and homes. An expert in this field of work should be chosen by the individual in need of the service.Information Technology. There is also a subcontractor in Information Technology where a freelance IT expert is hired by an individual who needs his IT services. The agreement should include data security. IT services usually include analysis for data security, database construction, software development, software maintenance, and etc. Before authorizing an agreement with an IT subcontractor, you should know if he has enough experience and owns the right tools. Research on his background as an Information Technologist and let him understand the terms and conditions of the agreement.HIPAA. Health Insurance Portability and Accountability Act of 1996 is legislation in the United States that seeks to ensure the privacy and security of medical data. In an agreement with HIPAA subcontractors, the subcontractors are responsible for keeping medical information secure. The information must only be given to allowable institutions as specified in the contract.The act sets the standards that need to be strictly followed by subcontractors to avoid punishments regulated by the law. Nevertheless, there are conditions where HIPAA allows information to be disclosed without the need to provide consent letters to the person involved: (1)When the law requires it by the court. The information can be used for crime investigations, determining fugitives, and etc.(2)An employer request for it because of an injury suffered related to the job.(3)The person is a victim of physical abuse or neglect.(4)The data is under FDA regulation.Moreover, the following information should be a part of the subcontractor agreement: a detailed description of the use of information, a clause suggesting that the information shouldn’t be disclosed unless granted by the contractor, the specific duties of the subcontractor, a report of any unauthorized use of information, and a Protected Health Information access. Subcontractors under HIPAA should follow the Act’s terms and regulations. Breach of Agreement can result in serious penalties executed by the government itself. According to the U.S. Department of Health and Human Services, unresolved complaints concerning the privacy rule as of January 2020 is only 1%.Janitorial. This is an unfamiliar type of agreement but it is very helpful for residential and commercial properties. The subcontractors here are the janitors who are hired by an agency. They are going to be employed under them as long as the project plan exists. Payment is usually given after the job is completed. There are different examples of janitorial duties:(1)Cleaning in residential properties such as condominiums and apartments. Their job is to make sure that the common areas are without a spot. (2)Cleaning for industrial accidents, and this requires the subcontractor to be authorized to help in cleaning up harmful substances. (3)Cleaning for commercial properties such as retail areas and offices.

How to Develop your own Subcontractor Agreement

In simple terms, contracting presumes that the client is directly related to the service provider, while subcontracting involves a client hiring an agency, company, or individual to hire another person for the task. Identifying what your services are will help you develop your own subcontractor agreement. With that in mind, let us pinpoint the important parts of a standard subcontractor agreement in a contractor-subcontractor agreement:

1. Provide Basic Information and Definition of Terms

Here is some basic information required in a subcontractor agreement: the date when the project would effectuate, the expected date of project fulfillment, the names, the corporation, and the address of both contractor and subcontractor. Also, there must be a definition of terms in the earlier portion of the agreement. This is essential so both parties will have the same understanding of some technical terminologies written within the contract.

2. Include Job Authorization and Orders

To enforce your contract and agreement you have to permit the subcontractor for the operation and the subcontractor should agree to this authorization. Furthermore, the details relating to the job should consist of the description of the job, schedule of deliverables, the time span of services, payment rate per hour, and detailed pricing for every service.

3. List the Details for Remuneration

Compensation for the following should be part of the contract:

Extra Labor. The contractor is compelled to compensate for the extra labor done by the subcontractor. Payment compensation for employees under the contractor is mandatory as long as it is specified in the agreement.

Transportation. If travel is requisite and the subcontractor seeks reimbursement from the contractor, the contractor should be informed beforehand. Once this is approved, the exact cost for travel will be reimbursed.

Tax. Some necessary taxes should be reimbursed by the contractor.

4. Supply an Invoice and Include the Terms for Payment

An Invoice is a record of services provided by the subcontractor and is a statement that sums up all the payment fees. The subcontractor shall account for a different invoice per task. An invoice will only be acceptable if it is according to the written and agreed Job Order. It is the contractor’s role to pay the subcontractor a few days after an invoice is approved.

5. Don’t Forget the Rights for Intellectual Property

Intellectual Property Rights are rights appointed to individuals for their creativity. Industrial property is what is mainly protected in a subcontractor agreement. Under this section of the agreement, a company should incorporate retention so that both parties will retain every profit, title, and right according to a pre-existing intellectual property right. The subcontractor is not allowed to apply a pre-existing right within the agreement if it comes from a third party.

A license to absorb Pre-existing intellectual rights into deliverables should be granted to the contractor. A subcontractor is not allowed to include anything from a third party right being integrated into the provision except if particular components were specified by the subcontractor, third party documents were identified, and permission was given by the contractor. After that, all deliverables shall be owned by the contractor regardless of pre-existing rights. Complete rights to the deliverables will be vouchsafed to the contractor without any resistance from the subcontractor. Apply contractor rights because the subcontractor is not permitted to any profit, title, and right of the contractor’s intellectual property unless necessary to accomplish the goal.

6. State the Grounds for Termination

A contractor has the power to terminate the contract without being held liable after an early notice is sent to the subcontractor. Also, the contractor may rid himself of the agreement if the job orders are not fulfilled by the subcontractor based on the agreement. On the part of the subcontractor, he should be given at least 10 days to correct his mistakes and failures after the notice is given.

Once the termination letter is issued, the subcontractor will provide the contractor with an update of the work that has been partially completed. Payment from the contractor shall be according to the subcontractor’s finished work. All equipment provided by the contractor enclosed in the agreement shall be returned by the subcontractor.

7. Set Rules for Confidential Information

Also known as the NDA or non-disclosure agreement, the main purpose of confidentiality in agreements is to protect relevant information that is exchanged between the parties involved. Here are the different types of NDA: The one-sided NDA which is used when only one party is carrying the protected information, and the reciprocated NDA which is an agreement used when two parties are carrying the information.

A subcontractor should not disclose any of the following confidential information: the agreement, the customer and contractor relationship, monetary information, list of customer names, marketing strategies, documents, methods, development, research, and more. There are cases in which a contractor is warranted by the subcontractor to disclose important information without being held responsible. Restriction can only be applied if the subcontractor has an agreement with the contractor of information confidentiality.

At some point of a contractor, individual, or a project owner’s life, he will have to deal with subcontractors to help him with some projects. A project that needs to be accomplished must be guided by a written and tangible agreement or contract between the parties involved. In fact, a subcontractor agreement will help both the contractor and subcontractor to legally deal with unforeseen issues that may come up along the process. Every contractor and project owner should practice using subcontractor agreements to keep their projects right on track. In addition, through this agreement, subcontractors will also know what their commitments are as service providers. It’s always better to be safe than sorry.