The Independent Subcontractor Agreement

THE INDEPENDENT SUBCONTRACTOR AGREEMENT

IVAN HOFFMAN, B.A., J.D.

So you are a web designer, one of those who has gotten very busy and now you need to engage the services of an independent contractor designer ("subcontractor" in this article) to help you do the work you have committed to do for your client. How do you approach the process from a legal standpoint? (Although this article is about the legal relationship between the designer and an independent contractor, similar issues may be presented if the designer has an employee do the work.)

First of all, rule number 1, is: YOU MUST HAVE A WRITTEN AGREEMENT, SIGNED BY THE SUBCONTRACTOR IF YOU ARE TO ACQUIRE EXCLUSIVE RIGHTS TO THE SUBCONTRACTOR’S COPYRIGHTABLE WORK. [Note: I refer to an “agreement” even though the law requires a valid, written “instrument of conveyance” or other legally sufficient writing signed by the subcontractor. However, it is much, much better to have a full, valid, thorough written agreement setting forth all of the many aspects of the relationship including but not limited to the conveyance of exclusive rights.] Under the United States copyright law, the creator (not an employee for hire) of any copyrightable work is the sole and exclusive owner of all rights to that work unless there is a written agreement, signed by the creator, transferring some or all of those rights exclusively to a third party, in this instance to the designer. A non-exclusive grant can be made orally but non-exclusive rights are often not marketable and so there should be a written agreement to evidence the grant.

Section 201 of the United States copyright law provides:

(a) Initial Ownership. Copyright in a work protected under this title vests initially in the author or authors of the work. The authors of a joint work are coowners of copyright in the work.

Section 204 of that law provides:

(a) A transfer of copyright ownership, other than by operation of law, is not valid unless an instrument of conveyance, or a note or memorandum of the transfer, is in writing and signed by the owner of the rights conveyed or such owner's duly authorized agent.

Thus, if you seek to acquire rights from the subcontractor to the work created by that subcontractor, you must have a written signed agreement.

THE ISSUES

1. Does the designer even have the right to bring in another designer to do the client’s work? When the client hires a designer, generally speaking it is on what is called a "personal services" type agreement, irrespective of whether or not it is writing. This means that the client has engaged the personal, artistic and creative services of the designer and is relying upon those personal services to fulfill the client’s vision. Absent a written agreement to the contrary, the law generally implies that such personal service agreements are *not* assignable, meaning that only the designer designated by the client may do the work. Thus, one of the essential provisions in the *client* agreement (different than the subcontractor agreement) is to grant to the designer the right to bring in that subcontractor.

2. The grant of rights from the subcontractor to the designer should be broader in scope than the designer is granting to the client. In other words, when the designer enters into an agreement with the client, one of the many provisions that must be covered is exactly who owns what rights to what materials and who has what rights to what form of use of those materials. But when the designer engages the services of the subcontractor the designer should acquire from the subcontractor greater rights than the designer is granting to the client. This is essential to a gap in rights which might put the designer in breach of its agreement with the client but also might make the designer an infringer of copyrights, trademarks etc. Thus, when a designer creates the designer’s agreement with the subcontractor, the designer must have the client agreement in front of the designer so make certain of this and other provisions. But of course, no designer should create their own contracts but should consult with an attorney knowledgeable in the field of intellectual property law and the issues presented by both the Internet in general and web design matters in particular.

3. The timing of deliverables must be carefully coordinated. In the designer’s agreement with the client, the designer undoubtedly agrees to deliver certain pages etc. as well as the completed site, on or before a certain date. Additionally, the same agreement should carefully define what constitutes the "site" or else there is no way to determine what is the nature of the work and when the job is completed and the designer entitled to be paid. Conversely, in the designer’s agreement with the subcontractor, the agreement should track exactly the same site definition and when the deliverables are due except of course the designer should provide that the subcontractor make delivery *before* the same deliverable is due to the client, say by 10 days or such.

4. Payments. The designer must have an obligation to pay the subcontractor only after the designer gets paid from the client and with some additional grace period. Otherwise, the designer may get into a cash flow bind, having to pay out before the designer gets paid.

5. Representations and warranties and indemnities. The designer should obtain appropriate representations and warranties from the subcontractor about the work the subcontractor is providing including but not limited to that the said work is original, does not infringe on the rights of others and many other such provisions. Additionally, the subcontractor should make at least the same indemnities as the designer is making to the client and the subcontractor’s indemnities should run both as to the designer as well as designer’s client.

6. Confidentiality and non-compete provisions. These, too, must be coordinated with the same type provisions in the designer’s agreement with the client.

CONCLUSION

There are of course many, many other issues to be covered in the subcontractor agreement. And of course, the designer must also have an appropriate written agreement with the client. These agreements should be prepared by an intellectual property attorney knowledgeable not only in copyright and contract law, but one familiar with the complexity and nuance of web design issues. Under *no* circumstances should the designer try to create either of these agreements without the assistance of such an attorney. And *never* use a form provided by others or even out of a book. They often leave huge gaps in scope and provisions.

**************** This article is not intended as a substitute for legal advice. The specific facts that apply to your matter may make the outcome different than would be anticipated by you. You should consult with an attorney familiar with the issues and the laws. **************** No portion of this article may be copied, retransmitted, reposted, duplicated or otherwise used without the express written approval of the author.