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Legal Considerations for Employers Looking to Hire Freelancers

An Annapolis Business Lawyer at Oliveri & Larsen Can Help You With Your Business Needs

As the gig economy continues to grow, many employers are looking to hire freelancers to fill gaps in their workforce. However, hiring freelancers involves legal considerations that employers must be aware of.

Employee Classification: Independent Contractor Vs. Employee

Employers must first understand the distinction between an employee and an independent contractor. According to the Internal Revenue Service (IRS), an individual is an employee if the business has the right to control what will be done and how it will be done. On the other hand, an independent contractor is in an independent trade, business, or profession in which they offer their services to the general public. Freelancers are independent contractors.

In Maryland, the Department of Labor uses the “ABC Test” to determine whether a worker is an independent contractor or an employee. The test considers whether the worker is free from control and direction, is customarily engaged in an independently established trade, and whether the work performed is outside the usual course of the hiring entity’s business.

Misclassification of workers can lead to serious legal consequences, including fines and penalties. Employers should consult with a legal professional to correctly classify their workers.

Contracts and Statements of Work (SOW)

Having a clear contract in place with a freelancer is crucial. The contract should outline the terms and conditions of the engagement, including the scope of the work, payment terms, and termination conditions. This also helps draw a line between your employees and your independent contractors.

An essential part of the contract is the SOW. This document details the specific tasks, deliverables, and timelines agreed upon by both parties. It provides clarity and helps avoid potential disputes down the line.

Non-Disclosure and Confidentiality Agreements

Employers often share sensitive information with freelancers during the course of their work. To protect this information, it is advisable to have a non-disclosure or confidentiality agreement in place. This agreement should clearly define what information is confidential and the consequences of breaching the agreement.

Ownership of Intellectual Property

A common concern for employers is who owns the work product the freelancer produces. Unless otherwise stated in the contract, the freelancer retains the copyright to their work. However, employers can include a “work for hire” clause in the contract, stipulating that any work the freelancer produces as part of the engagement becomes the employer’s property.

Many freelancers are okay with not owning the work they produce. However, they may want to use their work as part of their portfolio to attract other clients. You will need to determine if the work you have the freelancer produce can be shared publicly or if you do not want the freelancer to note what they have done for you.

An Annapolis Business Lawyer at Oliveri & Larsen Can Help You With Your Business Needs

Partnering with a freelancer can make sense. They are often experts in a niche area. However, legal issues could arise if you are not careful about the terms of your relationship. To keep your business compliant, speak with an Annapolis business lawyer at Oliveri & Larsen. Complete our online form or call us at 410-295-3000 to schedule your consultation. Located in Annapolis, Maryland, we serve clients in Ocean City, Anne Arundel County, Baltimore County, Baltimore City, Calvert County, Harford County, Howard County, Queen Anne’s County, St. Mary’s County, Worcester County, Kent County, and the upper and lower Eastern Shores of Maryland.

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