Do you have more freelance work than you can handle? That's not surprising. As we previously covered in "4 Ways You Can Prepare for an Increased Demand for IT Freelancers," the US Labor Secretary's recent withdrawal of two Obama administration legal opinions may lead to increased in demand
If you're struggling to keep up
with your workload, it might be time to hire an IT subcontractor. But before you make an offer, check out these five things you
need to know first.
1. You Are Responsible for the Action (or Inaction) of Your Subcontractor
Once you hire a subcontractor, you don't get to mentally check out from the project. Remember, the client hired you to get
the job done. That means you're responsible for everything your subcontractor does – or doesn't do.
"The most basic rule that anyone who uses a subcontractor must understand is that, from the client's perspective, EVERYTHING is your
responsibility," says attorney
Stanley P. Jaskiewicz,
member at the law firm
Spector Gadon & Rosen,
"Even if something has been delegated to another person or firm, if you are in charge, you can be held liable if your
subcontractor makes a mistake or fails to perform."
You don't want to hover over them, checking everything they do, but it's important to have periodic check-ins to make sure the
project is on track. Remember, the buck ultimately stops with you – not the subcontractor.
2. You Want to Make Sure Your Subcontractors Are Insured
The first step in hiring subcontractors is ensuring they have the necessary skills to get the job done. But in addition to checking
out a potential subcontractor's technical chops, you may also want to request proof of their business insurance.
"Subcontractors should maintain their own business insurances, such as Workers' Compensation, premises insurance [General Liability
Insurance], and Errors and Omissions Insurance in case there is litigation over their work product," says attorney
Richard Reice, a
partner at the law firm
Hoguet Newman Regal &
That way if you're sued over a subcontractor's mistake, you can make a claim on their policy to cover the damages.
If your subcontractors need help sorting out their insurance, point them in our direction – we can help them find coverage
3. You May Need to Add Subcontractors to Your Own Insurance Policies
In some instances, you may need to temporarily add subcontractors to your own insurance policies, even if they have their own.
"If the sub is doing work for you, your name and reputation are on the sub's work, so I will almost always recommend adding the sub
to my client's coverage, unless the cost is truly prohibitive," says Jaskiewicz.
However, adding a subcontractor to your policy may blur the line between whether this person is an employee or a subcontractor.
"It smacks of employment of the sub as opposed to an arm's length business transaction," cautions Reice. "That said, the freelancer
should check with their business insurance agent and review the requirements of their contract with their client."
4. Make Sure Your Subcontractors Aren't Classified as Your Employees
As we mentioned earlier, there's a risk your subcontractors could be legally classified as your employee if you aren't careful. To
avoid that, Reice recommends making sure that the subcontractor…
- Has other clients.
- Is in control of the means and manner of their work, including the ability to set their own hours.
- Has their own insurance, equipment, and premises.
Again, the recent changes by the US Labor Secretary make it easier for employers to classify workers as freelancers versus
employees. Still, it might be a good idea to consult with your attorney to make sure you are classifying subcontractors properly.
5. You Should Always Use Contracts When Hiring Subcontractors.
Use subcontractor contracts to outline project parameters and to circumvent potential disagreements about deliverables and
"Assuming that the freelancer is looking for a specific deliverable from the sub, the contract should in some ways not be too
dissimilar from the contract the freelancer has with the client," says Reice.
He recommends detailing…
- The scope of the work, including design parameters and any performance standards.
- Amount to be paid and when, due dates for work to be completed, and what the penalties will be, if any, if the work is late.
- Who owns the final work product.
- A provision that prohibits the sub from subcontracting any portion of the work to another subcontractor.
For more on why you should always use contracts with your subcontractors, check out "The Importance of Using Written Agreements with
Don't get overwhelmed by the formality of using a contract. Keep it simple and cover the major points.
"All contracts like this should be in plain English and with attention to clarity and detail," says Reice. "Professional societies
often maintain boilerplate industry-specific contracts that can be adapted to a given project."
We may not be a professional society, but we do have free sample contracts that you
may want to check out.
About the Contributors
As a member in the corporate law department of Spector Gadon & Rosen P.C.
Stanley P. Jaskiewicz
assists and advises privately-held and family-held businesses on a wide range of legal matters,
including contracts law, secured lending and negotiated acquisitions, Internet and technology law, corporate governance, intellectual
property, regulatory counseling, fine arts law, and foreign law.
Richard Reice, a partner at Hoguet Newman Regal & Kenney LLP, is an experienced labor and employment law counselor and litigator with both law firm and in-house counsel experience. He has
considerable expertise in negotiating employment contracts and collective bargaining agreements – litigating employment
discrimination and restrictive covenant / IP protection matters both locally and nationwide.