Freelance Contracts: Non-Competes, NDAs & Work-For-Hire Agreements — What You Need to Know

The following is a guest post.

Freelance contracts — not exactly the first thing that comes to mind when you think of freelancing is it? I mean, who wants to focus on legalese when there’s the freedom and flexibility to set your own schedule to look forward to; and no longer having to worry about a dress code or office politics. However …

If you freelance long enough — especially if you work with top-tier, high-paying clients — it is inevitable that you will be asked to sign one of the following documents: a Non-Disclosure, Non-Compete, or Work-For-Hire Agreement. So let’s dig into the legal side of freelancing to get you as prepared as possible.

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3 Common Freelance Contracts & What to Look for in Them

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 freelance employment agreements you’ll be asked to sign and what to be on the lookout for.

1. The Non-Disclosure Agreement

Freelance Contracts: What You Need to Know about Non-Competes, NDAs & Work-for-Hire AgreementsWhat is it? Commonly referred to as a “NDA”, a Non-Disclosure Agreement is a written, legal document creating a legally enforceable relationship between parties, identifying what information is considered confidential, and prohibiting the disclosure of it.

Understandably, a company or employer will use a 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.

For example, you may be asked to write for a company that specializes in technical products, and in order for you to gain a thorough understanding of the product, they will need to disclose privileged (secret) design and manufacturing know-how to you.

An overly restrictive NDA can mean long-lasting legal obligations and limitations on information and expertise you already had, making your freelancing hurdle, that much higher to jump in order to obtain work.

It can also prevent you from using certain information in your personal professional portfolio or website.

As a freelancer, to better protect your job opportunities and self-interest, be wary of the following four provisions before signing an NDA.

Freelancers: 4 Things to Look for in a Non-Disclosure Agreement

(i) Vague and broad language: Make sure the confidential information you are meant to keep secret is properly defined and not overly broad or vague. Be sure to avoid NDAs with language that seeks unreasonably limit your ability to work freely and distribute information. Make sure the following four categories are excluded from your NDA. 

  • Information available in the public domain;
  • Information you have received from a 3rd party;
  • Information you already have in your personal knowledge; and
  • Information that can be proved you arrived at on your own, without the aid of the information protected under the NDA

(ii) Steer 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 pre-determined amount of damages, without ever having to prove there was actual damage caused to them. Simply, if something goes wrong, you’re on the hook.

As a freelancer, legal protection and remedy is not as thorough as when working for a company, due to the lack of administrative and legal checks and balances. Keep in mind that liquidated damages provisions are often extremely restrictive, disproportional to the offense, and in violation of public policy.

Don’t sign a Non-Disclosure Agreement that has a liquidated damages provision in it. Click To Tweet

(iii) 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 any freelance contracts you’re presented with until you clarify exactly what it is you’re agreeing. Try to make sure you aren’t the only party liable if something goes wrong. Requiring reciprocal punishment for any wrongdoing by an employer can help keep your NDA fair and balanced.

(iv) Trust your instincts, you can always negotiate: At the end of the day, where there’s smoke, there’s quite possibly fire. 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.

It may seem like an inconvenience now, but consider consulting a local attorney to look over your freelance contracts. There are affordable legal options like Rocket Lawyer, where you pay a small monthly fee for things like looking over contracts. And of course there are legal forms like those from LegalTemplate that are written by attorneys — so all bases are covered.

These affordable options can save you angst and worry, and quite possbily even help you avoid a lawsuit.

2. The Work-For-Hire Agreement

What is it? Understand that as a freelance professional, you may want to protect your 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 is expressly agreed upon in a signed writing that it is “made for hire.”

As a freelancer, you may be asked to ghost-write or write anonymously for sites, relinquishing your name, persona, and rights to your work. 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.

What Freelancers Should Look for in a Work- for-Hire Agreement

By default, the copyright in your 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.

3. The Non-Compete Agreement

What is it? Of the three common freelance contracts, a Non-Compete Agreement poses the most dangerous threat to freelance professionals.

Why HostGator is the best web hositing company for freelance writers (IMO)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. Doing so protects profit, and eliminates the 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.

Freelancers: What to Look for in a Non-Compete Agreement

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 (it doesn’t last 10 years or indefinitely);
  • Has a reasonable geographic restriction (it doesn’t extend across the entire U.S. or states you have no connection to);
  • Does not interfere with public interest (it violates a fundamental right); and
  • Does not unnecessarily restrict your ability to pursue a living or career (it prevents you from gainful future employment).

Do not limit your future earnings and work opportunity by opting for a contract that limits such freedoms and rights.

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The Most Important Thing to Remember about Freelance Contracts

Being a freelance writer is hard work. Don’t handcuff yourself from future work; rights to your work; or the ability to use skills and knowledge you’ve worked hard to acquire because of restrictive and oppressive freelance contracts and agreements.

Be sure to read the fine print of all freelance contracts that you’re presented with, and stand your ground if the repercussions seem exorbitant or unreasonably restrict your ability to make a living. Remember, it is alright to Freelance Employment Contracts Explainednegotiate and if all else fails, as Kenny Rogers so famously sang, “Know when to walk away, and know when to run.”

About the Author: Rachel Ryan is a legal writer for LegalTemplates.net [Twitter | Facebook]. She specializes in providing professional content on a variety of legal issues. When she’s not writing, she can be found trying to become the next Martha Stewart.

P.S.: Freelance Writing Contract & NDA Agreement Template

This all-in-one, freelance writing and confidentiality agreement is fully customizable. It’s a Word doc; all you have to do is insert your info and your terms — and you’re good to go!

P.P.S.: A Practically Fail-Proof Way to Start an Online Writing Biz

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