Working as a freelancer carries a great amount of freedom and flexibility; relaxed dress code, detachment from watercooler politics, and the ability to choose projects that suit your skills, interests, and schedule. However, if you freelance long enough, it is inevitable you will be asked to sign one of the following documents; a Non-Disclosure, Non-Compete, or Work-For-Hire Agreement. In order to protect yourself from long-lasting legal obligations, potential lawsuits, and limited rights in your published work, here is a short guide to understanding the most common agreements you’ll be asked to sign and what to look for.
What is it? A Non-Disclosure Agreement is a written, legal document establishing a legally enforceable relationship between parties, identifying what information is considered confidential, coupled with the prohibition of the other party from revealing it.
Understandably, a company or employer will use an Non-Disclosure Agreement where they don’t want important trade secrets and goodwill distributed to competitors or the general public. A comprehensive NDA allows for free-flow of confidential information within an organization, an essential for peak business performance.
An overly restrictive NDA can mean long-lasting legal obligations and infringement on information and expertise you already had and use, making your freelancing hurdle, that much higher to jump in order to obtain work. As a freelancer, to better protect your job opportunities and self-interest, be wary of the following four caveats before signing an NDA.
1. Look for vague and broad language: Make sure the proprietary information you are meant to keep secret is properly defined and not overly broad or vague. Steer clear of language that seeks unreasonably limit your ability to work freely and disseminate information. Make sure the following four categories are excluded from the NDA.
- Information available in the public domain
- Information you have received from a 3rd party
- Information you already have in your personal knowledge
- Information that can be proved you arrived at autonomously, without the aid of the information protected under the NDA
2. Stay clear of a liquidated damages provision: STOP! Don’t proceed any further if there is a liquidated damages provision in your NDA. A liquidated damages provision guarantees if you breach the NDA, your employer will be entitled to a predetermined amount of damages, without ever having to prove there was actual damage caused. Keep in mind that they are often extremely restrictive, disproportional to the offense, and in violation of public policy.
3. Make sure the consequences aren’t a one-way street: Check to see if there are unusually extreme and disproportionate consequences for breaching the NDA. If the penalty far outweighs the breach, delay signing until you clarify things further.
4. Trust your instincts, you can always negotiate: At the end of the day, where there’s smoke, there’s fire. It may seem like an inconvenience now, but consulting a local attorney could save yourself from years of hardship and even a lawsuit. Keep in mind that the terms of the NDA aren’t set in stone, and there is no harm in asking to modify it, should anything make you uneasy or uncomfortable.
What is it? Understand that as a freelance professional, you may want to protect your proprietary rights in your work and not sign them over to your employer. A Work-For-Hire Agreement spells out the scope of how the work will be completed, and who owns the rights to the commissioned piece. The United States Copyright Act of 1976 defines a “Work-For-Hire” as a (1) work prepared by an employee within the scope of his or her employment, or (2) a work specially ordered or commissioned for use falling within one of nine categories, and it expressly agreed in a signed writing that the work was “made for hire.”
Retaining your rights in your published work grants you the right to reproduce it, sell or distribute it, create derivative works, and realize commercial gain from any display or performance rights. As a freelancer, by default, the copyright in the original work is solely yours, unless your agreement specifically prescribes that it is a “Work-For-Hire.” So, if you want to retain such rights in your work, be cautious of an employer using “Work-For-Hire” language in your contract.
What is it? Of the three common freelancing agreements, A Non-Compete Agreement poses the most dangerous threat to freelancers. In contract law, a Non-Compete Agreement or clause prevents a party from entering into similar agreements, contracts, or trade with competitors of the employing party.
It is standard business practice to prevent employees and freelancers from soliciting clients and competitors, to protect profit, and potential distribution of confidential information. But, it is not standard to unreasonably restrict a freelancer’s right to engage in any format of project or work with competitors for excessively long periods of time. Without proper precautions and skepticism, a restrictive Non-Compete could be the end of your freelancing career.
In order to determine whether or not the Non-Compete is reasonable in scope, look to see if it passes this four-pronged reasonableness test. If it doesn’t, negotiate or walk away.
Make sure it:
- Has a reasonable time restriction
- Has a reasonable geographic restriction
- Does not interfere with public interest
- Does not unnecessarily restrict your ability to pursue a living or career
Do not limit your future earnings and work opportunity by opting for a contract that limits such freedoms and rights. Note: If you are a freelancer in the advertising industry, it is the norm for Non-Compete Agreements to extend a bit longer than ones in other industries.
What You Can Take Away:
Being a freelancer is hard. Don’t handcuff yourself from future work, rights in your work, or using know-how and skill you’ve previously developed, because of restrictive and oppressive agreements. Read the fine print and stand your ground if the repercussions seem exorbitant or unreasonably restrict your ability to make a living. Remember, it is alright to negotiate and if all else fails, as Kenny Rogers so famously sang, “Know when to walk away, and know when to run.”
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