Contracts – liability, indemnity and risk management

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Who wears the risk if something goes wrong? That’s the subject of today’s instalment on freelance contracts. While we all have the best of intentions, there are times when things can turn out unexpectedly. But before we can look at the issues of liability and indemnity, it’s worth starting with few definitions and basic principles.

Disclaimer – Please note that I am not a lawyer. This information is provided for information only. You should get independent legal advice before using any of this or signing legal documents.

Liability

Liability is all about responsibility and blame. When you accept liability for something that means that in a legal sense you’re to blame.

Here’s an example of how liability can be expressed in a contract.

I agree to indemnify and keep indemnified <the client> from all claims, suits or demands that may come about as a result of the proposed work. This includes instances where the work:

(a) Infringes the intellectual property rights, including without limitation, copyright, of any third party; and/or

(b) Is defamatory, consists of negligent untrue statements, breaches any provisions of the <specific laws> or is otherwise unlawful or causes loss and damage to <the client> or any third party in any way.

This is one I would be very careful about agreeing to as it says that what ever happens – it’s my fault. Also, it invokes the magic word – indemnity.

Indemnity

When you provide indemnity or indemnify someone it’s the legal way of saying you accept liability or blame.

As you can see in the contract example above, the aim of the client is to shift liability to you and to have you indemnify them in the case that work causes some other party try and take legal action against the client.

So, do you know your risks when you take a piece of work? Perhaps this is a good opportunity to look at some basic risk management techniques.

Risk Management and Mitigation

In order to look at these issues in a business-focused manner, you need some basic risk management skills.

Every risk has two dimensions

  • impact
  • likelihood

So, to assess a risk we need to identify it and then measure these two things. There are well tested ways of doing this assessment using a Risk Assessment Matrix like the one below.

A risk assessment matrix. From Australian Capital Territory - Department of Education and Training Risk Management Framework

For risks that are assessed in the green and pale yellow areas, all you probably need to do is keep an eye on things. For items in the darker yellow areas, you need a plan that involves in monitoring and taking some specific actions. Items assessed in the red area require very close watch and a plan that is followed closely and regularly reassessed.

When you take on a new job, it’s important that you look at the risks, make sure you understand their impact and likelihood so that you can ensure that the contract doesn’t leave in a position where you might be sued.

There are many different risk mitigation strategies you can use. A common, although potentially costly one, is to purchase insurance. However, I’d start by looking at the terms of the work and modify them and any liability and indemnity statements in order to drag any significant risks down from the red zone into the green.

Some model words for a contract

So, what sorts of words should you look for in a contract? Here are some that you can use as a starting point. Remember – I’m not a lawyer so this is just general advice. You need to have a qualified professional look through any contract you consider signing.

<Your Name> will not submit any work which, to his/her knowledge, is defamatory or infringes any third party’s rights.

Provided that <Your Name> complies with all reasonable requests of <the client>, <the client> will insure or otherwise indemnify <Your Name>as follows:

a) Personal injury, accident or death caused while on assignment.

b) Loss of or damage to professional equipment and personal belongings while engaged in work commissioned by <the client>.

c) Public liability and legal action arising from work commissioned by <the client>.

<the client> shall be responsible for paying any damages and/or court costs which may be imposed as a result of any court action in relation to defamation or any other tortious action undertaken by third party concerning the material including any damages and/or court costs which might be imposed on <Your Name>.

Tomorrow, I’ll take a look at how you should define the work you’re engaging in.

Please use the comments to share your insight into managing the liability and indemnity associated with your work.

Freelance contracts – a guide

Many of freelancers I talk to are excellent practitioners of their chosen craft. However, when it comes to understanding the obligations and responsibilities for the freelancer and client, there’s lots of confusion. That’s why it’s important to understand a little bit about contracts.

Contracts are an insurance policy. If everything between freelancer and client goes well you’ll never need to look at the contract. However, when you get started the contract is important because it make clear what each party expects from the other. That way, there are no surprises for either party.

Many of freelancers I talk to are excellent practitioners of their chosen craft. However, when it comes to understanding the obligations and responsibilities for the freelancer and client, there’s lots of confusion. That’s why it’s important to understand a little bit about contracts.

Contracts are, in my view, something of an insurance policy. If everything between freelancer and client goes well you’ll never need to look at the contract. However, when you get started the contract is important because it make clear what each party expects from the other.

Next week, I’ll be writing a series of posts on freelance contracts. Each day, I’ll focus on a different theme.

Monday –  Payment schedules
TuesdayLiability and indemnity
WednesdayDefining the work
ThursdayCopyright, ownership and intellectual property
FridayA look at some model contracts

In the lead up to that series, let me know if there are any specific things you would like me to cover. Use the comments below or the Contact Form.

Don’t work for nothing – no matter what

Here’s a quote from Australia’s richest person, Frank Lowy.

“I don’t work for nothing. I’m entitled to get paid.”

If making money is one of your working goals, then I think Lowy’s advice is worth remembering. Clearly, giving freebies isn’t a path to financial independence. When you work for free (volunteer, charitable work is the obvious exception), you’re telling the world what the value of your work is.

(Quote source: The Age, 1 January 2011 – Australia’s Year in Quotes, Image source: SydWalker.info)

If you don’t value your work nobody else will

I was just reading an article at the Society of Professional Journalist offering some advice on freelancing for newspapers. Some of the tips, like “Read the newspaper” and “Know the value of deadlines” are pertinent and important. However, one tip got my attention:

Expect the pay to be small, if at all

Here’s the full tip

Typical pay ranges between $25 and $50 per story, with three-digit sums possible for feature pieces after a freelancer has a body of work under the newspaper’s masthead. Sometimes, however, newspapers will propose first-time assignments without compensation but dangle a contract if they are impressed with the results. Keep in mind that assignments may not be frequent or fulsome enough to constitute steady income.

One a few occasions I’ve pitched stories and columns to newspapers. Of the three newspapers I’ve pitched stories to, two have offered me fair payment for the work. The third liked my pitch. Their offer – I could put the URL of my blog in my byline.

I thought about that offer for about three seconds and then dismissed it. Why? Because if I don’t place any value on my work then why would anyone else? Sure, a link to my blog would be useful publicity but I can’t eat publicity. I need to be paid in order to pay bills, get food and provide for my family. I’m certain that the publisher would have sold more than enough ads to pay me fairly for my work.

I can appreciate that the SPJ is trying to provide realistic advice but getting paid $25 for a story isn’t good advice. It’s compliance with exploitation. A short 500 word story might take a few hours to research and write. At $25 – the hourly rate is lower than an unskilled worker would expect.

Would you accept work at this pay-rate? Do you agree with me that it’s poor advice to tell new writers to expect their work to be so poorly valued? Let me know if the comments.

Getting paid – the freelancer’s challenge

Once the excitement of making the decision to freelance passes and you get your first paying work, you need to channel some energy into making sure you’re paid promptly. Now, you’d think that the world is a nice place where submitting a nicely presented invoice, with all the details correctly completed was enough. Sadly, it’s not. While you may have lots of good clients that pay promptly, every freelance writer has horror stories of clients who don’t like parting with their cash.

Here are a few guidelines on getting paid. All of these are things I learned by experience and through listening to those who walked before me.

Although you might be grateful that all your door-knocking, cold calling and emailing has resulted in someone offering you some work, you need to understand the terms of the business engagement. Make sure you

  • Know the pay-rate
  • Understand the payment cycle
  • Invoice accurately and track payments
  • Know who to call if there’s a problem
  • Communication
  • Escalation

The Pay Rate

It might sound silly, but I’ve taken jobs where I’ve known the editor but not the publication. If the publication is new, it’s possible that the editor isn;t really sure but makes comments like “I’ll look after you”. My advice is that you need to get the rate in writing before you start.

I’ve written some notes on how you might like to consider pay rates in this recent post.

The Payment Cycle

Every publication I work for is a little different to the others. If you work for an online publication, they might run a weekly, fortnightly or monthly pay cycle. Find out!

Others will only pay either once the magazine has hit the news-stands or some period after. One of the most annoying clients I had paid 30 days after the magazine went off the shelf. While I was working regularly, it meant that I was getting a monthly payment. However, it took three months for the first invoice to be paid.

Invoice accurately and track payments

A decent invoicing system will make it easy to send the correct information to your client so that there aren’t any excuses for not paying. If your budget is modest when you start out, you can create a nice invoice template using either spreadsheet or word processing software. You can also create a register of invoices and payments so that you can track outstanding debtors.

Who you gonna call?

It’s inevitable when you’re a freelancer that a payment is going to be missed or late. Rather than just sitting there, stewing on it, contact your editor and ask what’s going on. In many cases, the person commissioning the work is not the person paying the invoices. In fact, once they pass the invoice off to the accounts people they may not know any other art of the process.

Once, I worked for a large daily newspaper and they took six months to pay an invoice. It wasn’t for a huge amount but I deserved to be paid. It turns out that I needed to fill in some form for the accounts department so they could set me up in their system. Once I found that detail out I was paid promptly. The trick was to find out who is actually in charge of the payments. In large publishing companies it’s rarely the editor.

Communication

Incredibly, even though, as writers we’re in the communication business we seem to not like talking about money. Although I’m reiterating something I’ve said earlier, if you’re not being paid, make sure you call your commissioning editor and get on to the accounts department.

Escalation

If all else fails, it’s time to call in some help. Most countries with a free press have a trade union. I suggest that you strongly consider joining. It’s not cheap (in Australia, it costs several hundred dollars per year) but one service my union offers is debt collection from tardy payers. And, unlike commercial debt collection agencies, the union doesn’t charge extra for the service – it’s covered in my monthly dues.