Contracts for Contractors (and Freelancers)
Let’s say you’re a small business and you need a little extra help. You go on one of those freelancer websites, like Fiverr or UpWork, and hire someone. But how do you know your business will be protected if things go wrong? What if the freelancer is unscrupulous or sloppy with confidential information?
Or on the flipside, if you’re the freelancer, how do you make sure that the client doesn’t take advantage of you? They’re giving you a contract – can you negotiate that? What do the terms even mean?
Don’t worry! We’ll go over some of the basics to make sure you know how to advocate for yourself, regardless of whether you’re the one hiring or getting hired.
What contracts do I need?
The two most common contracts used for contractors and freelancers are Non-Disclosure Agreements, or NDAs, and Independent Contractor Agreements, or ICAs. NDAs should be used before the contractor is hired, when you’re discussing confidential, sensitive, or non-public information in anticipation of furthering the relationship. ICAs should be used as the hiring document. Sometimes you don’t need an NDA, but you always need an ICA.
Your initial reaction might be “but what about the confidentiality?? Don’t I still need that?” Yes, absolutely. But a well-written ICA will include all the confidentiality protections of an NDA, and then some. If you already have an NDA together, then you don’t necessarily need those ICA sections, but it’s usually good to keep them anyway because otherwise the ICA might supersede the NDA, making the NDA not apply anymore. The other option is to refer to the NDA in the ICA by including something that says the NDA is part of the ICA.
What terms can I expect in an NDA?
NDAs are (usually) a basic confidentiality contract. They are supposed to protect intellectual property, like trade secrets, and other non-public information, like business plans, databases, and customer lists. An NDA should say:
Who the people signing are,
Why they’re signing an NDA,
What information is being disclosed or what the information is relating to,
That the parties promise to keep the information confidential, and
When the NDA expires (usually 5-10 years).
An NDA should have exceptions to the non-disclosure promise for things like subpoenas, government-required disclosures, and information that’s no longer confidential when that status isn’t the fault of the party receiving the confidential information. If you’re the one disclosing the confidential information, I understand if your initial reaction is to avoid exceptions and expiration time frames, but it’s a bad idea: a court can throw out the whole contract if you don’t include reasonable limitations.
What terms can I expect in an ICA?
ICAs vary pretty wildly from one business to the next. Some are a page long, others are twenty. It really depends on the needs of the relationship and some other factors, like if the contractor (freelancer) is in the US or not, what job duties they have, and how independent they really are. Most ICAs should include the following:
The services to be provided
How much the contractor will be paid (and how, when, and what fees or taxes are deducted, if any)
A statement that the parties are independent contractors and not employer-employee or partners,
Confidentiality provisions,
A division of the intellectual property (who owns what IP, and how will that be divided in the future?),
A force majeure or impossibility clause, and
Whether the contractor can hire staff or not
Other common provisions are non-competition (no working with competing businesses), non-solicitation (no employee poaching), indemnification, state law requirements, an arbitration agreement, and export rules. Some of these are really specific to certain situations and shouldn’t be written by laypeople or included unless you really understand what they mean. Make sure you consult with a lawyer (Meghan or otherwise) about any contract terms you don’t understand fully.
Other common contracts
NDAs and ICAs aren’t the only contracts you might see or need if you do a lot of this kind of work. Other agreements might include: Intellectual Property Assignments or a Proprietary Information and Inventions Agreement (PIIA), both of which typically transfer intellectual property to the business; Service Agreements, such as a Master Services Agreement (MSA) and Statement of Work (SOW), which are a common combination where the MSA governs the relationship but a new SOW can be written each time new work is needed or another project comes up; and Talent Agreements, which can be named a variety of different things but are usually when the freelancer or contractor has a specific skillset or is well-known within an industry, like influencers and celebrities, and are sometimes used between businesses to loan their employees to another business.
Conclusion
While some ICAs and NDAs aren’t, contracts are usually complicated even if they don’t seem like they are. It’s always better to have a lawyer look over your contract before signing or sending it to the other party; while most will be fine without revisions, every once and a while, they aren’t. Because this is a lawyer’s blog, on that lawyer’s website, obviously, you should contact Meghan the Attorney to take a quick look at your contract.
