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How to Legally Protect yourself when Hiring Service Providers

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Last revision: December 16th, 2020
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At some point in our lives, we will all hire a service provider. In fact, you may already have hired a service provider without really thinking about it. Service providers do many tasks, both personal and professional. For example, your virtual assistant is a service provider. So is your pet sitter.

When hiring a service provider, it's essential to ensure that you are legally protected each step of the way. Although you may not have thought about it before, your relationship with your service provider is a legal one. They are an independent contractor, and you are the client.

There are many steps to take to ensure that you remain legally protected in your service relationship. Some of them are legal steps, such as having a written contract, and some of them are safety tips.

In this guide, we'll go over everything you need to know about hiring a service provider.

Please keep in mind that nothing in this guide constitutes legal advice and it should instead be taken is informational only.

What is a Service Provider?

A service provider is someone that you hire to complete a service - any service - for you. A building contractor can be a service provider, or a babysitter, or a dog walker, or even a freelance writer. Usually, service providers are thought of in the context of those you bring into your home to complete a service. But, they can be any individual who works for you in an independent contractor capacity to complete a service.

1. Do your research.

The first thing to do before you hire a service provider is your research. Although it may be tempting to simply hop on the internet and quickly find a service provider to complete the job you need done, it's much safer to take your time doing research.

There are three different options for how you can hire a service provider: hire a company that sends their employees to complete the work, hire an agency who will send you a service provider unaffiliated with them, or hire an individual.

In order to find these three options, you can use the web or ask friends and family.

It is generally more reliable to hire a company that sends you their service providers. These companies will most often have adequate insurance coverage (more on that later), and they will take care of paying the service provider, so you only pay the company. However, any of the three options are available as long as you read reviews, ensure the service provider has any required licenses, and maybe even talk to former clients.

Final takeaway: Do your research on who to hire before beginning the service relationship.

2. Check on the service provider's insurance.

In most cases, the service provider you hire should have adequate insurance for their job. This may be general liability insurance, or it may be insurance specific to their industry, like contractors. The insurance is there to cover any damage which may happen as a result of the job.

You should check on the service provider's insurance before you actually hire them. You need to ensure that they have adequate coverage in case something goes wrong on the job they are doing for you.

Final takeaway: Check the service provider's insurance before hiring them.

3. Make sure you have a written contract.

This tip cannot be overstated: you must have a written contract with your service provider.

A written contract will not only ensure that both parties are on the same page about the work to be done, but it will protect you in case of any disputes.

If the service provider does not do what they said they would, then you have written evidence of the fact that they agreed to do it. If they ask you for more money later, you have written evidence of the fact that you only agreed to pay the amount in the contract.

There are several different contracts that can be used for service jobs. A Service Agreement can be used for any type of service job: It can be drafted to fit any situation. For specific service jobs, you can use an agreement for that particular role, such as a Virtual Assistant Agreement, Freelance Agreement, Editor Services Agreement, etc.

Plenty of things can go wrong in a service provider relationship, and you need to ensure that you are as legally protected as possible.

It's a good idea to get in touch with a licensed attorney in your state to draw up the contract.

Final takeaway: Get a legally valid, well-drafted contract written before you hire the service provider.

4. Ensure that the relationship stays an independent contractor relationship.

There are two types of legal business relationships: employment and independent contractor. You'll want to ensure that your service provider is an independent contractor.

There are several different factors to look at to decide whether it is an employment or independent contractor relationship. If you tell your contractor when to work, how to work, where to work, and you control their work, this looks more like an employment relationship. An independent contractor should be able to control their own manner of work.

It's important not to blur the line. You should ensure that your service provider remains an independent contractor, and you do not do anything that might make the relationship look more like employment.

Final takeaway: Don't exert unnecessary control over your service provider, and ensure they stay an independent contractor.

5. Don't pay a deposit that is too large.

Although we hope that service provider relationships go perfectly with no hitches, the truth is that many times, these relationships fall apart when the service provider doesn't complete the work to the quality or standard you expect. This is why it's crucial not to pay in advance for work that has not yet been completed.

Most service providers will want a deposit to get started on the work. This is fair to them, so you will likely have to pay that deposit. But, make sure the deposit is not too large. If the service provider is asking you to pay more than 10% of the total job, you may wish to find a new worker.

Final takeaway: Make sure you pay a deposit of just 10% or less before the work begins.

6. If the worker is coming to your home, make sure you have insurance.

Along with making sure your service provider has insurance, you also want to make sure you have adequate homeowners insurance if you are inviting the service provider into your home.

For certain service providers, like residential contractors, home health care workers, and babysitters, you have no choice but to bring them into your home. Before you allow them to enter, however, you should check with your own homeowners' insurance to see what your liability coverage is, and to understand your policy thoroughly. Mainly, you want to make sure that if a service provider gets hurt on your premises, you are covered.

Final takeaway: Double check on your homeowner's insurance before allowing anyone onto your property.

7. Don't be alone with the worker in your home.

While this is more a safety tip than legal advice, it is still a very important tip nonetheless: never be alone with the service provider in your house.

The truth is, as much as we want to trust those that we hire, the service provider is basically still a stranger. Your safety is at risk when you are home alone with that stranger. Not only that, but if your service provider gets injured and you are the only person home, you will have no witnesses as to what actually happened.

Because of all these factors, it's a good idea to ensure that you are never alone in your home with your service provider.

Final takeaway: Ensure that you have a friend or family member with you when the service provider comes to your home.

8. Wrap up the job with a receipt and a closing statement.

Although your written contract will have all the details of the job, it is still a good idea to wrap it up with a receipt and a closing statement. Once you pay the service provider the final amount, you should ask them for a written receipt. Even if it is very simple and handwritten, it is better to have a signed document from them saying that you completed payment.

A simple closing statement is also a good idea. This document can be short and sweet, basically saying what the service provider did for you and that your working relationship is now over.

To avoid any disputes down the line, keep yourself protected by having everything in writing.

Final takeaway: Have a written receipt and closing statement drafted when the work is complete.


By following the tips on this list, you'll ensure that you have a great working relationship and successful outcome with any service provider you decide to hire.

Final Takeaway

Most of us will hire a service provider at some point in our lives. The truth is that service providers help us complete tasks we may not be able to do on our own. The important thing is to keep in mind that it is a working relationship and to protect yourself legally each step of the way.


About the Author: Anjali Nowakowski is a Legal Templates Programmer at Wonder.Legal and is based in the U.S.A.

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