Transitioning Contractor & Employee Agreements?

searcher profile

April 25, 2025

by a searcher from Northwestern University - Kellogg School of Management in Sammamish, WA, USA

I'm acquiring a small business with ~35 independent contractors and 4 employees. To keep things smooth at close, I'm leaning toward a simplified approach: having each person sign a short Amendment and Assignment Acknowledgment so their existing contract carries over to the new entity. I’d do a more thorough contract update at year-end. Has anyone taken this route instead of full novation agreements or brand-new contracts? Any lessons learned or things to watch out for?
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commentor profile
Reply by a professional
from Marquette University in Kirkland, WA, USA
I agree with ^Michael Vann - this could be a legal mess. A while back a client looked a business with a lot of contractors. The owner insisted they could be contractors even though the State had fined him, saying they were employees. We figured he got business based on cost because he wasn't paying any payroll tax burden (and this was for labor with high L&I rates). Be careful. Then, if okay, let your lawyer handle it.
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Reply by an intermediary
from George Mason University in 819 Worcester St, Springfield, MA 01151, USA
Before doing anything I would have a conversation with employment legal counsel regarding independent contractor relationships vs. employment in this situation. You can find yourself in a lot of trouble with the Department of Labor
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