Freelancer Legal Issues

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 What Is a Freelancer?

A freelancer is a person who works independently and is not hired by any specific company on a permanent basis. Instead, they may act as independent contractors, being hired to do specific tasks rather than acting as the regular employee of the company.

Freelance work is especially common in areas such as:

  • Writing;
  • Painting and working in other media;
  • Photography;
  • Editing;
  • Copywriting;
  • Screenwriting;
  • Business consulting;
  • Web design and development.

Freelancing is now done in almost every domain of business endeavors. Basically, it involves simply accepting payment from another person or company to complete a specific, defined job for them. Traditionally, mamy accountants, doctors, lawyers, dentists, engineers and other professionals have done business as freelancers, or independent contractors.

There are a few different ways to approach freelancing. One is simply working with clients directly. This involves finding and communicating directly with clients through the freelancer’s own independent methods. A freelancer may be able to network, have enough business from existing relationships, or get referrals through word-of-mouth.

Another model is working as a subcontractor for another company or agency. An agency may obtain a contract for a large project from a client; the agency then breaks that contract into subcontracts to be completed by other agencies or freelancers. For example, a web development operation may obtain a contract for a full website project, and then subcontract the elements of the project to freelancers outside of the agency itself.

Many agencies routinely do business in this manner. The agency may employ only a small number of full-time, permanent people, and then subcontract specialized parts of projects out to freelancers.

Another popular method for finding client work is through freelance marketplace websites, which are accessible online. These websites serve as a kind of middleman by attracting freelance job listings on one side of the marketplace and freelance contractors on the other to compete for the jobs. The marketplace website acts similarly to an agency, and keeps a small percentage of the amount paid for a job as a transaction fee.

Each method of operation has its advantages and disadvantages. And each one also has some unique legal implications.

What Are Some Common Freelancer Legal Issues?

While each type of freelancing has its own legal issues, of course, there are some issues that they all share in common:

  • Licensing: Many professions require licensing if a person wants to practice the profession legally. Even if a freelancer does not need a professional license of some kind, they may need a business license from the state in which they operate;
  • Disputes about Benefits: Freelancers are typically not entitled to employment benefits unless they are specifically provided for in their contract. If a person is a freelancer, they must generally pay their own Social Security, Medicare and income tax withholdings, provide their own insurance coverage and set up their own retirement plan for retirement savings. If a contract does not contain specific language about benefits, a freelancer needs to assume that the employer does not provide them. The freelancer must purchase their own benefits;
  • Liability Issues: Issues regarding liability for illegal acts and negligence committed by the freelancer require attention. This can be an important issue. If the employer does not provide insurance to cover errors, omissions and/or negligence on the part of the freelancer, the freelancer may want to obtain some manner of insurance coverage for their professional activities;
  • Ownership of the Work Product: In some kinds of business, the ownership of the final product can be an issue that should be addressed in any employment contract. The contract should specify whether at the end of the employment relationship, the employer has exclusive ownership of the freelancer’s product or whether it is something the freelancer owns and can profit from selling to other users;
  • Disputes about Compensation: Compensation is key to both parties. In some situations, a freelancer may not have any input into the compensation. In other situations, the freelancer has some say over compensation. One key point is for the freelancer to know what amount it needs to support their business.
  • Work Quality: On occasion, employers or agencies are disappointed by the failure of the freelancer to provide original, non-plagiarized work. This issue is common with freelance writers and freelance writing projects. But deficient performance can be an issue in any freelancing business arrangement;
  • Work Quality and Completion: Legal issues regarding completion of a project and whether the performance provided was the performance promised in the contract can arise. Both parties should give careful thought to how to define the final product in their contract.
  • Breach of Contract: The parties should also give thought to what should happen in the event that either party breaches the contract. They might want any dispute to be resolved through alternative dispute resolution processes. Or, they may prefer the option of filing a lawsuit in a civil court of law. Possibly damages would be difficult to calculate and they want to include a liquidated damages clause in their contract.

How are Freelancer Lawsuits Resolved?

The basis of a freelance employment arrangement is the contract agreed to and signed by both of the parties. The contract should state the exact terms of employment, what performance each party must provide in order to comply with the contract, payment details, instructions regarding benefits, if any are provided. If benefits are not part of the deal, that should be made clear.

In some businesses, ownership of the work product would not be an issue, but in others it could be quite important, so intellectual property rights should be addressed in the contract. In some cases, the contract will also contain details regarding any legal disputes, for instance, whether the parties will submit to alternative dispute resolution methods in the event of a breach.

Thus, in many cases, a freelance work dispute can be resolved by reviewing the contract to determine what the parties previously agreed to. If that does not lead to resolution of disputes, then negotiations, possibly involving third parties, such as lawyers or others, are another option.

If negotiation of a resolution to a dispute is not possible, a lawsuit may be necessary to determine which parties are liable for breach of contract and resulting losses. In such cases, a damages award may be the end result to compensate the non-breaching party for losses caused by the breach of the other party. Or, other remedies are available, such as a court order that the breaching party perform their side of the contract.

Do I Need a Lawyer for Help with Freelancer Legal Issues?

Freelance work is increasingly common in today’s business environment, but it is also subject to many different areas of law and legal requirements. You may need to hire an employment law attorney in your area, if you need any assistance with situations involving the law of freelance work.

Ideally, you would consult with a lawyer before undertaking freelance work in order to get the best possible contract, if you have any control over that. A lawyer might be aware of issues that you have not considered and may be able to make valuable suggestions about what a contract should provide.

If a dispute develops, your lawyer can analyze your position and advise you as to what your best options would be going forward. If you need to file a lawsuit for breach of contract, your lawyer can represent you in court as well. An experienced employment law attorney can give you valuable advice at every state of an employment relationship.

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