What are the legal considerations when hiring a freelancer?
With sites like Freelancer and Upwork, hiring a freelancer is as easy as falling into a trap.
Don’t get us wrong, the freelancer marketplace is a wonderful development in modern society. There are cost savings for Australian businesses and financial rewards for the freelancer, particularly for those working in other parts of the world. It is common for businesses these days to make use of global freelancers, and it often works out well for them. However, here are 5 legal considerations when hiring a freelancer.
Copyright must be assigned in writing, signed by the owner.
Businesses commonly hire freelancers to write code, develop websites, do graphic design or draft advertisements and blog posts. Each example here results in some copyright being produced. In the case of freelancers, who are not employees, the copyright in that work typically remains with the freelancer. They also have moral rights with respect to that work.
Most businesses are going to want to own the copyright in the work they paid for. Section 196 of the Copyright Act 1968 (Cth) caters for the assignment of copyright, however, it must be done in writing, signed by the owner.
As such, our first legal consideration when hiring a freelancer is, make sure any copyright works produced are assigned to your business, or IP holding entity. This can be achieved after the fact through an Intellectual Property Assignment Deed. Better yet, do it as part of the service engagement. See Service Agreement below.
Service agreements are not just for enforcement, but also compliance and IP protection.
Engaging a freelancer should always be supported by a Service Agreement. As discussed above, if they are developing copyright material for your business, this IP needs to be assigned formally. A Service Agreement need not be an overly complex document when hiring offshore freelancers, however, they can get a little more complex if you hire someone in Australia, especially if you hire them for extended periods. Contractors can be deemed employees by law. Even when you hire someone with an ABN, you may need to pay them super. For that reason, onshore freelancers can be more complex than offshore ones.
In addition to IP assignment provisions and the tax and super implications, businesses should also think about confidentiality and privacy. A Service Agreement can also cover off each of these matters. However, if you intend to share confidential information about your business or customers with a freelancer before you engage them through a Service Agreement, you should be considering an NDA (Confidentiality Agreement).
Protecting your ideas and complying with privacy law.
An NDA or Confidentiality Agreement serves as some protection for your idea and confidential information. Of course, they can be very difficult to enforce offshore, however, that’s not to say you can’t or won’t need to in the future.
Confidentiality Agreements are not complex or expensive documents. You can have a template NDA drawn up for your business and reuse it each time you engage another freelancer. A Confidentiality Agreement will also assist with Privacy Compliance.
Having written service and confidentiality agreements are important legal considerations when hiring a freelancer.
Avoid penalties (up to $420,000 or more in the EU) and reputation risk.
If your business is an APP Entity, that is, an entity which is not excluded from compliance with the Privacy Act 1988 (Cth) and the Australian Privacy Principles (APP), then the next of the legal considerations when hiring a freelancer is, compliance with Privacy Law.
Within Australia, businesses need to ensure their employees, contractors and freelancers all comply with Privacy Law. However, when sending personal information offshore, or giving an offshore freelancer access to personal information stored onshore, you need to comply with APP 8 relating to cross-border disclosure of personal information. That is your entity ‘must take reasonable steps to ensure that the overseas recipient does not breach the APPs.’ This means the entity is expected to ‘enter into an enforceable contractual arrangement with the overseas recipient that requires the recipient to handle the personal information in accordance with the APPs.’
Hence one of the legal considerations when hiring a freelancer is to prepare a Services Agreement.
If you are not sure if your business is an APP Entity contact us and speak to a Privacy Lawyer.
Just because they have an ABN doesn’t mean you don’t have to pay super.
Freelancers may be onshore or offshore. When dealing with onshore freelancers it is important to determine whether you have to pay them superannuation. Even if your freelancer provides you with an ABN you may still need to pay them super. The ATO publishes further information about paying contractors superannuation and provides a superannuation guarantee eligibility decision tool, which can be found by clicking here.
Where you are engaging a freelancer on shore there is a higher risk that person may be, or in future be, considered an employee. Again the ATO publish a useful tool for determining if someone is a contractor or freelancer, it can be found by clicking here.
Not the only legal considerations when hiring freelancers!
These represent our top 5 legal considerations when hiring freelancers, they are not the only ones. Each business is different and has its own requirements, as does each engagement of a freelancer.
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