How small businesses should deal with subcontractors

Bruce Freeman is president of a marketing and public relations firm in Livingston, NJ, and writes a column for Scripps Howard News Service called the Small Business Professor. Here are some excerpts from a recent column on using subcontractors:

Question: I have my own, small consulting business and I’ve just started subcontracting work out to a friend. Do I need to have a subcontractor agreement in place and what should it cover?

Answer: Anyone who helps with a project adds to your legal responsibility and potential liability. You need a subcontractor agreement. and John Gerber, founder of UpstartLegal.com, recommends that it cover the following:

Scope of work and pay. The agreement should provide clarity regarding the work your friend will perform and how much he or she will get paid.

Contractor status. The agreement should include a statement that the parties are independent contractors, and that the contractor is not your employee.

Intellectual property. Your clients expect that you won’t expose them to legal liability for violation of third-party rights, such as copyright, trademark or trade secrets.

Confidentiality. Your contractor should agree to protect and not disclose confidential information of yours, as well as your clients, that he or she may receive in connection with the engagement.

Contractor’s authority. The contractor is not your representative and should have no authority to bind you or your company to any contract or obligation.

Non-circumvention. You can impose prohibitions against the contractor soliciting your clients, employees, and other key business relationships, including for a period of time after termination of the contractor relationship. Enforceability varies from state to state.

Termination rights. You should have the ability to end the relationship if it isn’t working out to your satisfaction.