The one decision only 28% of freelancers are smart enough to make

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There are more than 50 million freelancers in the United States contributing over $700 billion to the economy. But despite freelancers’ growing ranks and influence, about 70% of them have reported being paid late or not being paid at all.

On average, the amount lost by freelancers because of nonpayment is almost $6,000 a year.

That is a lot of money to lose, but not very surprising given the fact that only about 30% of freelancers have written contracts. Without written contracts, freelancers can easy be taken advantage of and stiffed.

An ounce of prevention is worth a pound of cure!

The fact that the vast majority of freelancers don’t have contracts is understandable.

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Contracts can be confusing and many freelancers are employed in industries where working without a contract is the norm. Contracts are often written in their own perplexing language which can make them intimidating.

However, it doesn’t have to be that way.

A contract can be simple. A few written and signed sentences between a freelancer and a client laying out the basic terms of the job can constitute a contract. Even something as simple as that can do a lot to reduce miscommunication, and by extension, costly and stressful legal issues down the road.

Contracts are preventative measure tools. Contracts help clients and freelancers avoid miscommunication and hold them to their promises.

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Without a written contract, things like details, payment schedules, and responsibilities can easily be forgotten.

With a written contract, clients and freelancers have a central reference point that they can look to during the course of the job in order to remind themselves of these types of details, as well as their rights and responsibilities.

New law in the Big Apple

New York City recently recognized the importance of freelancers and their need for contracts by passing the “Freelance Isn’t Free Act” (FIFA).

FIFA went into effect on May 15, 2017 and requires private businesses to have written contracts with their freelancers for all jobs that are worth more than $800 or last more than four months.

These written contracts, at a bare minimum, must include key terms like:

  • Name of the freelancer and his/her employer
  • Scope and cost of services
  • Dates
  • How the freelancer will be paid

If a client breaks FIFA by cheating a freelancer, there are penalties, anti-retaliation protections, and the client may be liable for double damages and attorney’s fees in civil litigation.

New York City is the first city to pass such a law to protect its freelance workforce. With such a huge and important market taking notice of this issue, hopefully other cities and states will take the hint that they need to do something too.

Contract resources

In a perfect world, freelancers would always be able to hire great affordable lawyers to help them with their contracts, but in reality lawyers can be unapproachable and prohibitively expensive.

There are, however, a number of excellent free and low cost resources out there that freelancers can take advantage of to better protect themselves and their work. Some of these resources are:

Do you use a contract? Why or why not? Let me know in the comments.

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About Liam Moriarty

Liam Moriarty is a lawyer, former law professor, and co-founder of Lawgood. Lawgood’s mission is to make legal services more affordable and approachable for freelancers and entrepreneurs. Lawgood provides services to protect your hustle, as well as ways to connect with entrepreneurial and freelancer lawyers. Check out Lawgood’s blog and follow them on all of the usual social media outlets @belawgood. Also feel free to email Liam at liam@lawgood.io.

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Comments

  1. Thank you, Liam! So often I hear fellow freelancers complain about clients who aren’t paying up. When pressed further, these freelancers admit that they had no written agreement with the client. I love that NYC passed this law… I hope state governments consider similar laws soon!

  2. Great resources and commentary, Liam. I have contracts with most of my clients, personally. Those who ask for them are often the most consistent in terms of payment and expectations.

    In the past, I’ve dealt with some huge ghostwriting clients who were taken aback when I asked about contracts and NDA’s. Perhaps some prefer not to have much of a “paper trail.” Handshake agreements are great until someone’s sleeping on a $600 invoice from three months ago, right?

    Again, great stuff!

    Brent

    • Thanks for the read and the comments, Brent! I’m glad that you liked it and that it was helpful.

      It’s a shame, but written contracts just aren’t yet the norm in a lot of creative industries. So being able to point to a law that requires a written can be super helpful when requesting one from a client.

      I’m with you. Handshake agreements are the downfall of many good business relationships. The better the relationship I have with a client, the quicker I make sure that they sign an agreement.

  3. Kate Smith says:

    Great article! Yes, the only time I have had trouble getting paid was when I didn’t insist on a contract. Lesson learned the hard way!