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Negotiating as an Independent IT Contractor?
C3ntaur asks: "I've been doing IT work -- System and Database Administration -- for over 10 years now, and I recently decided that it's high time I went freelance. I had done occasional side work before, but now I'm in the thick of it, with most of my income generated by contract work.
One of the challenges I've encountered is in negotiating a fair contract, and I'd like to pose it to the Slashdot community: How do you deal with the PHB types who hand you boilerplate contracts that they themselves haven't read, let alone understand?"
"I've patiently tried to explain my objections to legalese that translates to 'we own anything you've ever invented, or ever will invent', and 'you must obtain our written permission before working for anyone we deem to be a competitor', but it falls on deaf ears. In fact, I'm often told that it doesn't mean what I think it means. I am willing to hand over all rights to work I do within the scope of a contract, and I'm willing to protect and keep confidential a customer's IP and trade secrets, but the contracts they want me to sign are far, far broader than just that.
IANAL, but I do have a pretty good understanding of the English language. So unless these contracts are written, interpreted, and enforced in some Orwellian world where the lingua franca is Doublespeak, they could seriously hamstring my ability to earn a living. I cannot sign them, but my would-be customers won't do business with me if I don't. Any ideas?"
IANAL, but I do have a pretty good understanding of the English language. So unless these contracts are written, interpreted, and enforced in some Orwellian world where the lingua franca is Doublespeak, they could seriously hamstring my ability to earn a living. I cannot sign them, but my would-be customers won't do business with me if I don't. Any ideas?"
Tell them that if what you read in the contract doesn't mean what u think it means then its not clear enough in the contract that it means what they say its "suppose" to mean. If they truly don't mean what they say, then they should write it down or be willing to make the minor alterations such as "within the scope of..." to the contract. If they won't make the changes ask them if theres someone else to talk to..or turn down the job because if they're not willing to at least talk about it..theres usually a reason....
draft up your own contract, and hand it to them.
After all, *you* are the one selling your services to them.
Just sign the contract with disappearing ink. A few months down the road - no more problem.
The problem is. . . For a lot of contractors I see nowadays, the contract is the most defining part of your job responsibility, and isn't the job outline or job responsibility listed in the contract? I don't think you could get off by just shredding the contract, but I would have someone (preferable a lawyer) draft a contract that suits your, and the clients needs.
YOU'RE WINNER !
Another lame blog
You might run it by other people in the same boat at smallbizgeeks.com. Someone there is probably fighting with the same thing.
My thoughts:
The most common reaction is to just sign the contracts, and ignore them. The companies you are working will probably never do anything, even if you are technically breaking conditions in the fine print. This will probably work... but of course you do run the risk of being really screwed if a company decides to come after you because of some percieved danger to them. Not all parts of the contract are enforceable, but some are, and all parts are valid enough to get you into an expensive court battle.
If you can't afford to lose any clients, you might have to take this risk for a while. You're not in the strongest position -- they can probably find someone who will be willing to sign away their firstborn for the work.
Hopefully, you can afford to skip a few contracts -- and you can give them a revised version of the contract that you *are* willing to sign. This means you write in or attach the changes, and get the person hiring you to sign off on the changes.
In most cases, they *are* just using a boilerplate agreement, and don't even know what's in it. Just treat modifications to the contract as a standard part of the deal.
As databank says, make them live up to their words. Either make the contract say what it is supposed to say or skip out.
As far as negotiation tricks go, it is good to have a lawyer-friend. Find a trustworthy attorney and arrange a low cost deal. All you need is his stationery, signature, and sometimes advice. When the PHB hands you the contract, say "I will have to have my attorney take a look at this" and take it with you. Forward your copy of the contract with your objections noted to your attorney and have him send a letter delineating HIS objections to the potential PHB. Usually folks will negotiate if they see that you mean business.
An alternative is to incorporate, at least as an LLC and get an EIN. Then they don't "hire you" rather they contract for services from your company. The types of contracts for corp-to-corp are generally much more flexible and since your corp can be under contract with several other corps at once, usually they can be reduced to a simple NDA. There are other advantages, as well as costs, to this approach, but overall if you are going to work for yourself, I think it is best to incorporate.
An alternative that I have voiced before is to simply say that you cannot sign in good faith. Say that this contract conflicts with other, previous contracts, and you are not at liberty to say who those other contracts are with due to an NDA. If they still don't budge, display your spine and walk.
Good judgement comes from experience, and experience comes from bad judgement.
- W. Wriston, former Citibank CEO
You don't need to spend a lot of money believe it or not (and you can write it off as a business expense). Use the resource wisely: If you can only afford to consult with him/her once, then just do that. Ask about the legal ramifications of insisting on the types of contract changes you want. Ask for advice in speaking to the PHBs (a lawyer's job is language). Ask for advice on making such arguments for changes and coming across as more professional than the PHB (which always works). If you can, come up with your own boilerplate contracts and have the lawyer edit/check them - when the PHB hands you a boilerplate contract counter with your own. This technique works well.
If you can afford to tap the attorney occasionally (lawer friends are great to have), then tell the PHB that you need to pass the contract by your "legal department" and ask if there is a contact person at the client company that you should coordinate contractual changes with. This gives you more bargaining power and eliminates the "well that actually means" responses.
Basically it comes down to treating yourself as a business. Always keep in mind what your "staff" is and who will want oversight of particular things (even if the only people are you and you). If you were an employee of a large company negotiating, you would have to pass the contracts by the legal department right? Then the company of you has to as well. I know this is starting to get metaphysical - think of it this way: departmentalize yourself. Think of the different aspects of your "business" as it's own department like you would in a company (accounting, legal, billing, customer service, janitorial, security). If you sould like a mega-corp, the PHBs will treat you with a different level of respect.
US Democracy:The best person for the job (among These pre-selected choices...)
The clauses you're worried about may actually mean what the PHB says they mean. They may mean what you think they mean. They may mean something else. They may be entirely unenforcable in your jurisdiction, and thus not worth arguing about. I don't know, and neither do you, because YANAL.
What a contract actually means is determined not by common sense, but by relevant contract law (which you don't know) and case law (which you don't know). If you really care about what a contract is actually enforcably commiting you to, hire a lawyer.
As you said earlier, IANAL, therefore you should probably seek one.
Open Source, Open Mind
1) Ask if you can have the document examined by your lawyer. If the PHB quibbles, say that you are just following the advice you have had from your business adviser.
2) Actually consult a lawyer -- I mean it. Even if is only the lawyer from your local Citizens Advice Bureau (CAB) or local small business/enterprise bureau. If your strapped for cash either agency is usually able to point you to a local lawyer is quite willing to do a quick consult on the expectation of future business.
3) If the contract limits your ability to do work for other customers then ask your lawyer to add some form of time limit ( sunset clause ) to the contract, with a clause demanding a suitable retainer to cover the time your restricted. Have your lawyer add an opt out clause so that the PHB can decide to stop the retainer with the automatic effect of you no longer being obligated by the terms of the contract.
In most cases the business in question wont even bother with the retainer and will just cross out and initial the offending restrictive clauses in the contract. If they choose to keep paying the retainer, and yes it happens, you may just have to renegotiate or just wait until the sunset clause applies.
Being an independent, I am usually the one who provides the contract, as they are paying me for my services and produced product, not the other way around. Usually, I run into NDAs, and that's pretty much it. If someone were to hand me a crazy contract (overly restrictive terms) and my lawyer gave me a thumbs up anyway, then my fee would just go up to cover the additional restrictions.
I have lost a few contracts when there was a strong disagreement regarding terms, but my time is too valuable to take any old job that could end up screwing me out of future business. I also don't do charity work (except on odd weekends) when I could be out beating the bushes for the next gig.
Yeah, right.
You can always cross out/alter and initial any clauses in your contract that you don't agree with. In some cases, the company doesn't even review the signed contract to notice that you've changed the terms.
I've hired a lawyer in somce cases to review a contract (about $250, IIRC), but many times I don't if the risk is fairly small. Personally, I'd rather do work for a company with a good reputation that pays me in a timely manor than for a lousy company under a good contract.
Andrew Semprebon EQ Systems Inc.
The emerging trend for dealing with this is apparently just to sigh whatever they hand you, work for a year, then sue them for not treating you like an employee, after which you retire.
Where I live contracts can be changes as long as you both sign them off. You don't like the "We own everything you've ever made" clause then cross it out. Have problems with the won't "work for any company that we think is a compeditor" change it to "won't work for any company in appendix a" which means they have to give you a list of who they don't want you to work for.
The important thing is that you both sign it off and both keep a copy. Unless it's a really uptight company they won't have a problem with it.
Reminds me. The company came out with some sort of new "intellectual property agreement" crap a while back and sent it out to us. While a lot of items on it were of the "duh" sort, there were a number of provisions which I felt put code and ideas I came up with *off the clock at home* in jeopardy.
So, I changed them. A whole bunch of stuff in there which sidestepped a number of possible legal issues with OSS I have released and will release in the near-term. Hell, I stopped short of writing myself in a golden parachute just to see if I could get away with it.
Anyway, I signed it and they countersigned and I got a copy right here, just in case.
Did I mention it's probably A Bad Idea to send out contractual agreements in MS Word files?
Incorporate a company, call it "mycompany inc." or whatever. Doesn't matter.
Write yourself a little contract with your company that it gets none of your ip and everything you do is your property. You don't really need a lawyer for this.
When you contract out, you are contracting out through your company. Never sign a contract from person to customer. Only sign from your company to customer.
Now you can sign anything they hand at you. No worries. Worst case? Dissolve your company and incorporate a new one. You are protected by the corporate shield.
The reason that it can be true that 1+1 > 2 is that very peculiar nonzero value of the + operator
You can also make modifications to their contract and initial them.
Bingo! We have a winner.
Contracts are nothing more than ink on paper until both parties sign them. They are not leveraged buyout instruments, nor implements of destruction, nor are they non-negotiable. They are a boilerplate template some clown in legal copied out of a book.
If you are reading through the contract and hit a part that says 'we own every idea you have ever had in your life and you can't work for anybody in the same country after you work for us' just draw a line through that section, add a revision if you are so inclined (such as 'the company retains full rights to anything developed under contract during the contract period, on company hardware and software, during billable hours, and I will not work for any directly competing company within 60 miles for the lesser of one year after this contract expires OR the length that this contract was in effect - that last part keeps them from hiring you for one day, firing you, then making you unable to work for any other company for a full year), and initial it.
Do that once you are already in the front door and the hiring manager is hungry to get you busy on his project, be fair but firm, and be ready to walk if they balk. My experience is that when you are that far into it, honest and fair people will treat you honestly and fairly, and they understand.
Glonoinha the MebiByte Slayer
A lot of folks have mentioned crossing out clauses, or "changing" the contract. This is good, as far as it goes. If the contract is on normal paper (and is short enough) retype the thing, or at least the pages with the offensive stuff. Odds are very high the PHB can't read it, so as long as the first page and signature page look about the same, you could probably add something saying that you may only be addressed as "My lord and rightful master".
"A plan's just a list of things that don't happen" -- Mr. Parker, "The Way of the Gun"
Have your own company, keep it very simple. Write a standard contract that your company uses to offer your services. Keep it short and minimalist, mine is under a page. Include the basic stuff clients typically want, NDA, etc. Have a simple termination get-out clause for either party. Have it reviewed by your lawyer (once).
Make that part of the terms of your standard service offering (you are the one offering services, not them). If they want changes, and you are willing to consider them ask them to pay for your lawyers review of their verbiage. Be willing to say no and walk away if they are unreasonable. Never assume they will not try to enforce the deal, if its in writing its cos they want to be able to enforce it. Protect your right to maintain and develop your own IP. Never sign any contract that is unclear or harms your long term rights.
When in doubt, get legal advice.
This goes for deals with all the so-called agencies too. Any agent who tries to get you to sign a deal just to get introduced to a simple contracting assignment is not a good agent. Protect yourself, say no, walk away. Its best to avoid all agents anyway, they are all ethically lower than whaleshit...
Most real deals are clean and simple, if its not, then something smells, walk away...
There is no god; get over it already! Never exchange a walk on part in the war, for a lead role in a cage.
That's a sure-fire way to get what you want. However, before you go demanding 80k from a 3 man startup, you should really consider whom you're dealing with.
.02 cents...
Size the company up, and it's industry. Is it a rough-edged factory? If so, you'll likely have more flexibility in other areas, but not as much in the finance area. Is it a well-heeled Law Firm? If you may be able to work harder numbers, but they'll expect more from you as far as time/effort/perfection/etc.
Really, it boils down to experience. I have a good gauge of what I can charge and/or reasonably expect; but I have that based on years of consulting work and working my way up the ranks (at various companies).
Make sure you leave the interviewer with a bid of confidence (true confidence in both conversation and relational skill); not just some cheesy one-liner ("I'm the best man for the job!"). HR people aren't dumb; and they can see right throught that.
If you're confident in what you know, and if you're convinced that you can help their company, you'll likely get the bid (assuming you're not vastly more expensive than the next guy).
On the other side of the same token, don't be cocky. That'll get you no where.
Just my
Don't think that a small group of dedicated individuals can't change the world. It's the only thing that ever has.
My standard contract was developed by a lawyer who specializes in software, who went over it with me very carefully. I know the importance of each clause. I also know that it is fair to both sides, unlike some clients' contracts I have been presented with. Sometimes, clients are just testing to see what they can get away with, since most contractors are naive about such things.
One thing I learned is that contracts drawn up by clients do not say that you must be paid before they own the intellectual property. Something this basic could be disputed if they didn't pay you in full! My standard contract says my clients must pay me in full before the IP rights transfer to them. Obviously, no PHB or lawyer can with a straight face suggest removing that clause from my contract, but many have tried presenting contracts without saying exactly when the rights transfer. This is a subtle point I would have missed had I not spent time with an attorney.
Gave the company the rights to use what I was providing for them from now until eternity in whatever medium existed and could exist
and
Gave the company blanket immunity from anyone seeking damages and that I would basically take the heat.
Needless to say, I took out my Sharpie® and just made most of the page BLACK , signed it and faxed it back.
They used the stuff I sent them even though I didn't agree to ANY of their terms.
(note this was not for a job....it was stuff I provided to a TV show..)
I like microcars
Is it possible you could start handing over your own contracts? Then it'd be up to the companies' lawyers to sort out whether they're comfortable with the contract. Might not work for bigger companies, but if there's any chance it could work for some, it'd also give you a more professional look. After all, it's you who constantly deal with contractorship papers, not the companies -- you ought to know better what's required to make everybody happy.
Put in there anything that's relevant and nothing more, no excess legalese or anything. Write down that the company owns the work they've contracted you for, and nothing else. Write down that they can't impose limits on your other customers, unless they pay compensation to you.
It's clear that many of the people here haven't worked as a contractor, and don't really understand the concerns of the corporates who might hire your services.
I should preface by saying that my direct experience applies to the UK. I guess that you're in the United States, although you don't say (it's wise to do so when asking legal-type questions). However, since the US has a similar legal system to the UK, at least some of what I say is likely to be applicable.
I've worked in all of the different positions: as freelance contractor, as PHB-type and as Director of a medium-sized consulting company, so hopefully I can give some insight into what is important. However, IANAL, and would recommend legal advice if you're really unhappy about sopme aspect of a contract.
First thing: you really need limited liability and professional indemnity insurance. In the UK you can buy a company for around £100. I guess you should be able to get a ready-made corporation in the US for something similar. This protects your personal assets in the event that a contract goes bad. Professional indemnity insurance will cover you if (for example) an exploding blogsnatch factory controlled by a database you worked on suddenly explodes for some unlikely database-related reason. It's pretty cheap (about £300 p.a. in the UK). These things protect you. I recommend them highly, even though I never had recourse to use them.
For all those who say 'present your own contract', I'd have to say that, for most freelancers this simply isn't an option. You'll need to start with what is offered to you or go hungry.
What does a conract mean
This may seem a little strange, but generally a contract tells a story - it really should say what is expected of you and what you get in return. Try to read past the legalese and understand what it is trying to say.
Although many contracts are really quite poorly drafted, you should find at least the following:
So first go through and understand what is being asked.
Negotiation time
You do have some power to modify a contract, but understand that companies have their red-lines as well. The usual procedure is something like the following:
This is where the advantage of trading as a company arises: even the most pointy of PHBs can understand that a company has several customers, hence a company cannot possibly agree to 'all your code are belong to us'. You'll have no problem with this type of clause if you're incorporated.
However, the company needs to know, for certain, that they own the code you create for them. This means that you may need to address:
I have taken a class or two in business law, but I am NOT an expert. Take this with a grain of salt. The idea to incorporate seems to be a sensible one. Besides the immediate benefits to this particular issue, it can afford you benefits down the line. I am guessing you are hoping to turn this freelancing into a full time business. If so, incorporating can literally save your neck. All responsibility is put on the corporation and not the individual. You act as a employee of the company; and in most cases can't be held responsible for the actions of the company even if you are the CEO (As long as you don't break any laws.) If your company runs into any legal problems, it is the company's problem and they can't touch your personal assets. The easiest state to incorporate in is Deleware. You can usually do it for hundreds of dollars. As a corporation you would only be working on behalf of the corporation. As long as you sign contracts on behalf of your company, you could always quit. They can hold your corporation to the terms, but not you. No employee of the company may engage in work with the competition, but you will not be an employee of the company. So you can't be held to it. Not unless you signed a noncompete with the corporation that you formed. I also must suggest that you play hardball from the beginning. In the business world, you are going to meet people who are bound and determined to intimidate their workers. They do this to give themselves the advantage in negotiations. You must mentally tell yourself that you don't need their money, that you are doing them a favor. If you allow them, they will have you working 18 hour shifts for minimum wage. On the other hand, if you are confident in yourself they will respect you more. Most of the time, with this attitude people are going to believe that you are worth the money because you have so much confidence. Now true, you might loose a job here and there, but they are jobs you don't want anyway. I have been around enough to see this happen many many times. We have turned down jobs, only to find out that they hired the competition to an insanely stupid contract that they can't get out of. Don't worry if your competition gets the job over you. Chances are that your competition will be getting screwed so bad in the deal that they will have to close shop. (I have seen it happen.) Lastly, don't ever sign a noncompete clause. It seems that your potential client tried to throw one in. That basically makes you an employee of the company with no benefits. If they don't want you working for the competition suggest that they hire you as a fulltime employee. If they are going to hold you to their company, get some benefits out of it. If they balk at the idea, then don't even consider it. They don't ask the electric company not to sell electricity to their competitors. They don't ask the water company not to sell water to their competitor. So why are they asking you not to sell your services to their competitor? Chances are they can't hold you to the noncompete, but they can tie you up in court wasting all your hard earned money. Since most states won't enforce noncompetes except in some very rare instances, the real teeth in the clause comes from the money it would take to fight it out in court. This is their way of discouraging you from contesting in the future.
One of the most powerful negotiating tools known to man is the takeaway. That's where you simply say I can't do this and start packing up.
9 out of 10 times they blink. The other one time, you were really going to get screwed.
-- $G
Big companies have a legal department to look after the legal interests of the organization and there's nothing wrong with you doing the same, in fact, it sets you apart as a true professional as opposed to a hired hack.
Trust me on this one.
In other states IBM get rights to anything you do anywhere, anyhow, etc. Not in NC.
Just another reason NC is better that CA and the Yankee kingdom up north!
Think Deeply.
Aww, who made this a troll? I thought it was hilarious!!! Silly moderators...
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