Build a solid legal foundation before loading up with outside creatives.
Advertising agencies and freelancers go way back when additional creative minds and hands are needed on large projects or new business pitches. And as clients increasingly demand more and better work for less money, independent copywriters, graphic and web designers, producers, and others often become regular or frequent parts of small and mid-size agency operations. Their contributions can be invaluable. But their presence can create important legal issues that should be resolved before disputes arise. Fortunately, the legal aspects of agency-freelancer integration are easily manageable. Here are three tips to help both small agencies and freelance creatives build and maintain good working relationships.
Clarify rights to promote project work
Assuming that your small agency and its freelance talent have executed a written independent contractor agreement including a proper work for hire clause, ownership of any outside creative contributions to brand campaigns remains with the hriing agency. But that doesn’t necessarily mean that your freelancer is clear on whether he or she can promote agency work on social media. Talent thrives on promotion, and most freelancers are eager to get new examples of their work seen. Using project images on personal websites, Behance, Twitter, and other creative and social media platforms may not be understood as outside a freelancer’s rights unless clearly set forth in a project agreement.
Such promotion may be acceptable and even beneficial, but it might also be quite harmful to an agency or its brand client. Work disclosed before a pitch, for example, could be exploited by competitors. Similar harm could follow a freelancer’s promotion of work created for but ultimately rejected by the agency or brand. The promotion could even violate the agency’s own confidentiality obligations to its client. A well-drafted agreement will include appropriate provisions for confidentiality and portfolio rights, specifying exactly where, when, and how freelancers can use brand work.
Limit risk for outside creative liability
Unlike large agencies and brands with general counsels and legal departments on staff, small agencies are less able to manage the risks of IP infringement and other critical legal issues arising from a freelancer’s work. A designer’s claim that images presented for client use are not subject to license, for example, will likely be of little value if a copyright claim is asserted after work has been published. A writer’s insistence that statements about a product are not misleading will not prevent Federal Trade Commission action.
Your independent contractor agreement for creative services should make responsibility for obtaining and maintaining errors and omissions insurance clear. Since in most cases it may be that the freelancer lacks E&O coverage, the agency should be certain that its own policy will apply.
Maintain an independent contractor relationship
Understanding whether freelance talent is independent for tax purposes is essential to agency management. Generally, an agency must withhold income taxes, withhold and pay Social Security and Medicare taxes, and pay unemployment tax on wages paid to an employee. But no such withholding or payment is normally required on payments to independent contractors.
Agencies must carefully weigh multiple factors related to behavioral and financial control when determining whether talent falls into the employee category. Some factors may seem contradictory, suggesting both that an outside creative is a staff worker and an independent contractor. No single factor is dispositive. Agencies should strive to have the balance of evidence weigh on the contractor side. A written client services agreement that requires outside creatives to operate as legal entities before a project begins, for example, along with project plans showing deliverable milestones after the project starts, may reduce the risk that the IRS will recategorize a freelancer as an employee.