Category Archives: Insight Article

The term freelancer is just one label commonly used to describe the self-employed. Others include consultants and independent contracts. Hiring freelancers can offer numerous benefits for businesses, such as cost savings and access to specialised skills. However, businesses must be aware of the legal considerations of working with freelancers. This article will explore the critical legal issues employers should be mindful of when engaging freelancers and provide guidance on navigating these challenges.

Contracts

While having a contract with freelancers is not a legal requirement, we highly recommend that you establish any expectations clearly and that both parties protect their rights. A comprehensive contract should include the following elements:

• Scope of Work: Clearly define the tasks and deliverables expected from the freelancer and the position regarding remedial work (if relevant).
• Project Timeline: Establish the timeframe for completion of the project.
• Dispute Resolution: Outline how the parties will handle disputes through alternative dispute resolution methods or civil litigation.
• Termination Clause: Include a termination clause that specifies the conditions under which either party can end the contract.
• Payment: How, when, and by what method should the freelancer expect payment(s) under the contract? 
• Confidentiality: Are there specific types of confidential information to protect during the engagement and after termination? 

By having a well-drafted contract in place, businesses and freelancers can ensure a mutual understanding of their obligations and minimise potential conflicts.

Intellectual Property Rights

One of the primary legal concerns when working with freelancers is the issue of intellectual property (IP) rights. While businesses generally have implied rights to use the material created by freelancers, it’s essential to establish clear guidelines to avoid potential disputes. Businesses should consider the following:

• Crediting: Determine whether you will acknowledge the freelancer as the work’s author or prefer to keep their contribution anonymous.
• Promotions: Specify how and by whom the material will be used for promotional purposes.
• Exclusivity: Decide whether you require exclusive or non-exclusive rights to the material.
• Usage: Clearly define how and where the material will be used.
• Editing: Establish whether you have the right to edit or alter the material in the future.

Employers can mitigate potential IP disputes by addressing these considerations upfront and documenting them in a consultancy agreement or terms and conditions.

Payment Terms

Clear and well-defined payment terms are essential when working with freelancers to avoid financial disputes. Businesses should carefully consider the following aspects of payment:

• Rate of Pay: Determine whether you will offer a fixed sum for the project or an hourly rate. If using an hourly rate, establish how hours will be measured, recorded and reported.
• Invoicing: Specify if freelancers are required to send invoices and establish the frequency and method of invoicing.
• Payment Timescale: Agree on a payment schedule that works for both parties to ensure freelancers can manage their finances effectively.
• Taxes: While freelancers typically handle their tax affairs, it’s essential to clarify whether they are VAT registered and ensure that you address any tax implications.

Employers can avoid disputes and maintain positive working relationships with freelancers by setting clear payment terms and adhering to them.

Non-Disclosure and Exclusivity Agreements

Confidentiality is crucial when working with freelancers who may have access to sensitive information about your business. To protect your interests, consider implementing non-disclosure agreements (NDAs) to ensure freelancers maintain confidentiality. Additionally, exclusivity agreements can prevent freelancers from working on similar projects for your competitors during a specified period. These agreements provide legal recourse and safeguard your proprietary information if any breaches occur.

Other Legal Considerations when Working with Freelancers

In addition to the legal issues mentioned above, there are several other factors businesses should be mindful of when working with freelancers:

• Worker Classification: The law has dealt with situations where freelancers were found to be employees because of the nature of their working relationship with the organisation that engaged them. Ensure freelancers are correctly classified as independent contractors to avoid conflict with employment law and potential liabilities. Ensuring that what happens in reality is reflected correctly in the agreement is vital. 
• Insurance Coverage: Assess whether freelancers require their own insurance coverage for errors, omissions, or negligence related to their work. Consider including clauses in contracts to address insurance responsibilities.
• Workplace Issues: Although freelancers are not traditional employees, they still have the right to a harassment-free and non-discriminatory work environment. Ensure that managers and employees interact professionally and maintain a respectful workplace culture.
• Licensing and Permits: Some professions may require freelancers to hold specific licences or permits to practice legally. Businesses should confirm that freelancers possess the necessary credentials to perform their work.

By proactively addressing these legal considerations, businesses can foster positive and compliant relationships with freelancers while avoiding potential legal pitfalls.

Working with Freelancers, the Conclusion

Working with freelancers offers numerous advantages for businesses, but it also comes with legal complexities. By understanding and addressing the key legal considerations discussed in this article, businesses can establish clear expectations, protect their intellectual property, and maintain positive working relationships with freelancers. It’s crucial to consult with legal professionals to ensure compliance with relevant laws and regulations. By navigating these legal considerations effectively, businesses can fully leverage the benefits of working with freelancers while minimising legal risks.

Contact Karen Cole today for more information on working with freelancers.

Note: This article is not legal advice; it provides information of general interest about current legal issues.

What is a settlement agreement?

Settlement agreements (formerly known as compromise agreements) are legally binding documents where an employee waives their employment rights and agrees to set aside any potential claims they may have against their employer in return for compensation.

As the document waives the employee’s rights to pursue claims against their employer, they must seek independent legal advice on the document and its terms before they sign it.

Once both parties have signed the agreement and a legal adviser has certified that the employee received independent legal advice, the agreement becomes legally binding and enforceable.

Why do I need a lawyer?

There is a statutory obligation for employees to obtain independent legal advice on any settlement agreement to ensure its terms are understood and that an employer fairly compensates any employee for any offset of their rights. If you do not seek independent legal advice, then the terms of the settlement agreement are not legally binding, and the agreement is rendered unenforceable.

The fact that the law mandates the requirement for independent legal advice demonstrates the severity of unquestioningly agreeing to the terms of a settlement agreement and the value of obtaining legal advice. It reflects the case that often the employee is in David’s position, whilst the employer is seen as Goliath.

What should the settlement agreement include?

If you’re giving up your employment rights, the terms upon which you do so must be clear. The agreement should include any payments you are to receive and any arrangements put in place until exit and beyond.

Typically, payments would include:

• Payment in lieu of notice (if applicable)
• Accrued salary up to the termination date
• Any bonus payment (if applicable)
• Pro-rata benefits up to the termination date
• Accrued untaken holidays up to the termination date
• A compensation payment (if applicable)
• A redundancy payment (if applicable)

Settlement agreements often cover other aspects, including the obligations of both parties, after you leave. For instance:

• An agreed form of reference
• A statement informing colleagues of your departure
• An agreement not to make any disparaging remarks
• The return of any company property
• Clarity around any post-termination restrictions that survive your employment ending

Your lawyer will consider these clauses, advise if they are reasonable, and point out what is missing or how you could improve the agreement.

Who pays for my legal fees?

Your employer will usually include a contribution to your legal fees under the terms of the agreement. However, this will only cover advising on the terms and effects of the agreement and highlighting any critical issues. It does not generally extend to negotiating any amendments.

There is usually some scope to ask for an increase in the contribution towards legal fees under the agreement. However, no statutory requirement obligates an employer to agree to any increase.

For the best chance of success, your lawyer will need to justify the request for an increased contribution adequately, and this will turn on how much time they have invested in taking your instructions and understanding the documents.

What should I expect from my lawyer?

Your lawyer will want to understand the background and circumstances of your case and will likely ask for various documents to identify potential claims, or lack thereof, and consider what award you might achieve if you pursue a claim against your employer rather than settling.

Your lawyer will advise you on the meaning and effect of the agreement and what may happen if you do not reach an agreement. However, if you do agree to settle, they will provide you with a signed adviser’s certificate, which confirms that they have given you independent legal advice on the proposed settlement agreement.

Can I get more money or better terms?

As this is a negotiation between you and your employer, there is no right or wrong figure necessarily. It will turn on the circumstances of why your employer is offering you the agreement and the strength of any claim you might have. The stronger the potential claim, the better the negotiating hand.

We can advise on the merits of potential claims and on pushing back for an improved offer. If you instruct us to negotiate on your behalf, fees will increase, so negotiating for improved terms must be proportionate. We will consider the specific facts of each case and its merits and guide you through the process, including representing you in any negotiations.

How long do I have to think about my settlement agreement?

Your employer should give you a reasonable period to consider the proposed terms. There is no statutory minimum, and it will vary depending on the facts. However, you can expect around ten calendar days to consider the agreement and take legal advice. This timeframe accords with the ACAS Code of Practice.

What if we can’t reach an agreement?

Your employer will likely want to continue with any proposed internal action, such as a disciplinary or redundancy process. You will need to understand your rights and any applicable timescales in these circumstances, as you might need to raise a grievance in line with your employer’s internal policies, which we can assist with, or make a referral to ACAS for early conciliation in contemplation of bringing a claim. Such referral is usually a mandatory step prior to being able to commence a claim in the Employment Tribunal.

If you have been offered a settlement agreement or are in the early stages of negotiating an exit package, you should seek independent legal advice as soon as possible to protect your position. Speak to employment solicitor Patrick Simpson today.

Note: This article is not legal advice; it provides information of general interest about current legal issues.