Your small business is growing and you’d love to hire another employee. Unfortunately, you can’t justify or afford full-time help. What do you do?
Hire an independent contractor.
Before you do that, however, you should make sure you have a work-for-hire contract in place. For starters, the agreement will define your expectations for the job or assignment, spell out timelines for work completion, and set payment terms. Perhaps more importantly, a work-for-hire agreement ensures that creative work and innovative ideas produced by a freelancer belong to your company and not to that individual. This enables you to continue using the material long after that contractor has moved onto the next project or job.
“Whether the contractor writes copy, designs webpages, creates your logo, or invents something, it’s imperative that you have the ownership rights to everything he creates. Just paying for the work is not enough,” says Joel Lehrer, a partner at Goodwin-Procter LLP in Boston.
What Should Your Work-for-Hire Contract Include?
Now that you know why you should use a work-for-hire contract, it’s time to start thinking about what to include in the agreement. This legal document should be tailored to your business needs and include specifics about the particular job or project. To get you started, here are eight essential elements to consider:
This is where you outline what is expected from the contractor in terms of project details, timelines for completion, when the job will begin, and any other information you’d like to spell out.
In this section, you state what you will pay the contractor and any other specifics related to compensation. For example, if you require the freelancer to submit an invoice on a specific date for payment, this is where you would include that information.
In a nutshell, this clause states that the contractor cannot disclose or divulge any information gleaned while working at your company. This can include corporate information, technology, customer lists, or anything else you feel is proprietary to your business. You might also include a section stating that when the job assignment is done, the contractor must return to you all company records, computers, or any other technology.
This provision is key as it gives your company all rights to any creative or innovative work developed by the contractor. This is the essence of your work-for-hire agreement.
This provision is mission-critical as it states that the freelancer cannot solicit your customers or employees. It’s a good idea to have this in place during the term as well as for some reasonable timeframe after the project ends, such as 12 months.
Relationship between the contractor and your company
This explains that the individual is not an employee but rather an independent contractor. This may seem redundant, but it’s important to make this clear so that you’re not expected to offer employee benefits like paid vacations, health insurance, and sick leave.
This is often hard to enforce as independent contractors are just that – independent. They are entitled to earn an income and typically do this by working for multiple client companies, including If you plan to put in a non-compete, it’s a good idea to list out specific competitor companies rather than entire industries. Be prepared that some contractors may not agree to sign your contract with this clause in place if they feel it inhibits their ability to derive income. You might also want to keep in mind that non-competes are hard to enforce in court, and even unenforceable in some states.
Since all states have different laws and regulations, it’s important to list the state in which this agreement will be governed. This is generally where your company is based even if the contractor works remotely in another state. You may also be able to choose a state if your company is incorporated in a different state than the one in which you operate. If you have a choice of jurisdictions, you may want to check with an employment attorney to see which state offers the best employer-friendly laws.
How to Create a Write a Work-for-Hire Agreement
The easiest and most cost-effective way to write an agreement is to use boilerplate templates at online legal sites like LegalZoom and Rocket Lawyer. These plug-and-play agreements can be created in mere minutes.
On the other hand, if you have questions or need a more specific agreement, you may want to hire an attorney. Although a customized agreement generally costs more, it may be the best choice to protect your company’s value. It may also help you avoid potential pitfalls and lawsuits down the line, says Lehrer at Goodwin-Procter.