Whether someone is an employee or an independent contractor isn't just a label you pick — it's determined by the actual working relationship, and the wrong classification can trigger tax penalties, wage claims, and benefits liability regardless of what the contract calls them.
What actually determines classification
Regulators generally look at control: who sets the hours, who provides the equipment, whether the work is central to your ongoing business, and whether the person works for other clients too. A contract that says 'independent contractor' doesn't override those facts.
What belongs in an employment agreement
Employment agreements typically cover compensation, benefits, at-will status or term, confidentiality, and often non-compete or non-solicitation terms — plus references to your employee handbook and policies.
What belongs in an independent contractor agreement
Contractor agreements should specify the scope of work and deliverables (not hours or schedule), payment terms tied to milestones or invoices, IP ownership of the work product, and an explicit statement that the contractor is responsible for their own taxes and benefits.
Why the document itself matters even when the facts are clear
Even a correctly classified relationship benefits from a properly drafted agreement — it's often the first thing regulators or courts look at, and vague or boilerplate language is easy to poke holes in during a dispute or audit.