It is vital that you understand the distinction between independent contractors and employees. It is critical that business owners correctly determine whether the individuals providing services are employees or independent contractors.Looking to hire remote contractors and freelancers? Here's why you need to have an Independent Contractor Agreement. The law does not define an independent contractor. MSU. Procurement will review and process the form and sign a Service Agreement with the Independent Contractor. If you are misclassified as an independent contractor, you may be denied benefits and protections to which employees are legally entitled. The IRS considers all workers to be employees and only exceptions may be paid as an Independent Contractor. Employer-Employee Relationship. Payers use Form 1099NEC to report payments made in the course of a trade or business to others for services.