How To Avoid Uber’s Independent Contractor Agreement Mistake

By | Business Contracts, Business Lawyer | No Comments

Uber Technologies Inc.How To Avoid Uber’s Independent Contractor Agreement Mistake has discovered that an independent contractor agreement can be costly if not handled properly.

Why? The company has been getting pounded by government agencies and courts that have taken the position the company’s drivers are actually employees instead of independent contractors.

Although the extra benefits vary by jurisdiction, they can include eligibility for a minimum “living” wage, paid time off (PTO), health insurance, retirement plan contributions, worker’s compensation upon injury within scope of employment (e.g. traffic accident), and unemployment compensation upon departure from the company.

Related Article: Independent Contractor Agreements – Should You Use Them In Your Business?

A common response to these extra costs is for Uber (and similar companies) to simply withdraw from jurisdiction by ceasing to provide transportation services.

Why Is Uber Losing These Cases?

Labor law has become very pro-employee over the past hundred or so years to correct for sweatshop abuses of the 19th and early 20th Centuries.

The legal hammer that’s used to beat down companies like Uber is the degree of control exercised over the workers. If there’s too much control, the government is going to err on the side that the work is being performed by employees rather than self-employed independent contractors.

Related Article: Boost Business With Independent Contractor Agreements

The more socialistic a jurisdiction happens to be, the less control a company will be able to have over the work being done in order to avoid an employer-employee relationship.

This is why it’s essential to have a skilled legal professional prepare your independent contractor agreements as part of your arsenal of business contracts used to protect your company.

What To Include In An Independent Contractor Agreement

Some of the issues your business lawyer should consider for inclusion in your independent contractor agreement with workers are:

  • The contract’s title and language within the agreement should make it clear that it is between a company and an independent contractor, not an employment agreement.
  • The agreement should provide the worker with considerable discretion on how and when the work is performed beyond that an employer would provide an employee for rendering the same services. For example, don’t require contractors to work identical hours as your employees unless it’s absolutely necessary.
  • The contract should make it clear the contractor is ineligible for benefits the company offers its employees.
  • The contractor should be informed that the contractor is responsible for related taxes (e.g. self-employment taxes as an independent contractor) and that the company is withholding taxes as if the contractor were an employee or making contributions to worker and unemployment compensation funds on the worker’s behalf.
  • If the work can be performed somewhere other than the company’s premises, the contract should permit the worker to do so, except with restrictions that prevent such work being performed in jurisdictions likely to find there to be an employment relationship regardless of what’s in the agreement.
  • Unless it’s not feasible, ideally you’ll want the agreement to shift the responsibility to the worker to use his or her own equipment and materials to perform the work.

Related Article: How To Use Independent Contractor Agreements

Type Of Work Matters

It’s important to factor in the scope of the work being performed before deciding whether or not it makes sense to offer employment or an independent contractor relationship to worker. If the work is ongoing and such that is typically performed only by employees, it’s going to be difficult to argue from a legal standpoint that the worker is an independent contractor instead of an employee.

For example, a receptionist who answers telephones a reception area at your company’s headquarters during weekdays from 9 a.m. to 5 p.m. with a mandatory lunch break at noon is arguably an employee even if there’s a written agreement that refers to the receptionist as a contractor. On the other hand, a telephone answering service offsite makes for a stronger case that the worker(s) fielding the calls are contractors.

The B2B Contractor Agreement Solution

Ideally, you’ll want your contract to be between two companies instead of between your business and an individual. Even if there’s only one worker involved, it’s often better to contract with that worker’s single member limited liability company (LLC) or Subchapter S corporation to have the work performed.

Related Article: B2B Contracts – How To Avoid 4 Common Mistakes

This places a much higher hurdle for the worker to overcome for claiming employment status with your company because, if anything, the worker is an employee of the LLC or corporation the worker owns that has entered into the independent contractor agreement to provide the services to your business.

If you need an independent contractor agreement or an employment contract, you’ll want to learn more about our Business Contract Legal Protection Package now.

Software Contract: How To Pick The Right One

By | Software Agreements, Software Lawyer | No Comments

software contractWhen you’re looking for a software contract to use, the first issue to resolve is what kind of agreement you really need.

There are many app-related contracts that go under a variety of different names, including:

  • Software Development Agreement
  • Software License
  • Software Consulting Contract

Software Development Agreement

This type of software contract is for the creating of a new application or version of an existing app. In some situations, it’s a master development agreement that covers multiple app projects over a period of time.

The most important issue that will shape the entire agreement is whether you’re the developer or the business that’s retaining developer. An experienced software lawyer will prepare a contract that reflects your interests on key terms, such as scope of work, intellectual property ownership, deadlines for milestones, and payment terms.

Related Article: Keys To A Successful Mobile App Development Agreement

Many software agreements also cover ongoing app maintenance for a period of time. However, if your software contract doesn’t address this issue, you may want a separate software maintenance agreement with the developer to ensure you have ready access to the expertise you need to fix bugs, keep the app compatible with OS upgrades, etc.

Software License

There are many types of app licenses. The most common is the end user license agreement (EULA). Other popular licensing agreements include beta testing, distribution, resale, and trial/evaluation licenses.

Software Consulting Contract

Like a development agreement, a software consulting agreement will vary considerably in its terms and conditions depending upon whether you’re doing the consulting or the client who is hiring a consultant. A good software attorney can draft a software contract that meets your needs under either scenario.

Do You Need Only One Software Contract?

It’s common for a business to need more than type of software agreement to protect their interest in the application.

Let’s say you want to pay a third party to develop an app for your company.

First, you’ll want a software development agreement that favors you and encourages the developer to deliver on a timely basis. Ideally, this contract will include ongoing maintenance provisions for the app so you have some support.

If you’ve got beta testers, you should protect your app with a software beta testing agreement.

What about a trial/evaluation copy for prospective customers? If you’re doing that, then a software evaluation license makes sense.

For your end users of the software, you’ll want a EULA.

Unless you’re selling the software from a single site owned by your company, chances are software distribution agreements (domestic and international) plus resale licensing will come into play too if you’re serious about protecting what you own.

If you’re unsure what software agreement(s) you need, it makes sense to set up a phone consultation today with Software Lawyer Mike Young.

Nondisclosure Agreement: Can You Use An NDA To Gag Employees?

By | Business Contracts, Business Lawyer | No Comments

nondisclosure agreement ndaAs an employer, you should weigh the pros and cons of using a nondisclosure agreement to keep your employees from revealing to others information that you do not want known outside of your company.

Common Nondisclosure Agreement Uses In Employment

NDAs are frequently used by employers to protect proprietary data, such as trade secrets, business plans, etc. Nondisclosure provisions are commonly part of a written employment agreement rather than a separate contract.

In addition, nondisclosure contracts are a tool used to keep a current or former employee quiet as part of a settlement of legal or other claims that would damage the company if made known to others (e.g. sexual harassment).

Related Article: Non-Compete Agreement – How To Make It Legally Binding

NDA Benefits

Here are three common benefits of using nondisclosure agreements:

(1) Protection of proprietary data you do not want competitors to know about;

(2) Reputation management; and

(3) Minimizing financial loss through settlement instead of risking litigation.

NDA Weaknesses

From an employer’s perspective, a nondisclosure agreement is not bulletproof because there are some things that cannot be kept confidential even if an employee agrees to sign the contract.

Related Article: Can You Verbally Modify A Written Employment Agreement?

For example, if a trade secret protects information that risks public health or safety (e.g. defective device sold that injures customers, company environmental contamination of water supply, etc.), the employee cannot be forced to remain silent to protect the company.

Similarly, an NDA cannot be used to prevent a current or former employee from cooperating with law enforcement with regard to a criminal investigation.

Non-disparagement Agreement

Despite its deficiencies, a non-disclosure agreement generally helps protect a company’s interests. In addition, to reinforce confidentiality, it’s also a good idea to have a non-disparagement agreement with current employees and former employees as part of any settlement. Typically, the non-disparagement provisions are part of the employment contract, settlement agreement, or NDA rather than an independent contract between the parties.

Related Article: Does Your Business Lawyer Draft Contracts That Encourage Lawsuits Or Dispute Resolution?

These provisions typically consist of a reciprocal promise between the parties, both employer and employee agreeing not to say bad things about each other to third parties or the public in general. However, an agreement not to disparage has similar weaknesses to an NDA. For example, the employer cannot rely upon it to prevent a former employee from providing law enforcement with information in a criminal investigation that portrays the company in a bad light.

Related Article: How To Use A Non-Disparagement Clause To Protect Your Business

Where Do You Get An NDA?

The best place to get a nondisclosure agreement to use with your employees is from an experienced business contracts lawyer who handles employment-related issues. If you would like Business Attorney Mike Young to prepare one for you or revise an existing NDA, the first step is to set up a confidential telephone consultation with him.

Can You Verbally Modify A Written Employment Agreement?

By | Business Contracts, Business Lawyer | No Comments

written employment agreementIt’s fairly standard language for a written employment agreement and many other business contracts to provide that the written agreement supersedes any prior oral statements or agreements between the parties.

However, that language doesn’t preclude future modification of the employment contract by verbal agreement of the parties.

For example, there was a recent California case where the employee assumed additional duties and was orally promised additional compensation by her immediate supervisor because of the new responsibilities. The state appellate court found the employee was entitled to the additional compensation because there have been a verbal modification of the employment agreement.

Related Article: Texas Employment Contract – 8 Key Issues To Cover

As an employer, how do you reduce the risk that oral statements made to your employees will modify a written contract?

First, the employment contract should clearly provide that it cannot be modified except in writing signed by the parties.

Related Article: How To Get Employees To Give Two Weeks’ Notice When Quitting

Second, limit the number of managerial employees who have the authority (actual or apparent) to change compensation and other key terms of employment. For instance, if it is made clear to the employees that immediate supervisors do not have the authority to give raises, etc., it reduces the likelihood that anything said by this first level of management will be binding when it comes to additional compensation.

Third, train your managers on what can and cannot be said to employees with respect to terms and conditions of employment. If your business is too small to have a dedicated human resources professional, then train your managers to direct compensation inquiries by employees to someone in executive management who is skilled at handling such matters.

Related Article: On-Call Scheduling Of Employees – Should Employers Use It?

If you haven’t already done so, be sure to have an experienced business attorney review the employment contracts you’re currently using with your personnel. And if you’re not using a written employment agreement, perhaps it’s time to have your business lawyer prepare one that protects your interests so you decrease the odds of getting sued by disgruntled employees or reported to the government for wage and hour labor law violations.

Business Contract Signatures – 4 Costly Mistakes To Avoid

By | Business Contracts, Business Lawyer | No Comments

business contract signaturesThe bigger the transaction, the more important it is to make sure your business contract signatures are proper.

Here are three common costly mistakes companies make with their business agreements.

  • The wrong person signs the contract
  • A person signs the agreement in the wrong capacity
  • One or more key signatures are missing

Wrong Signatory

In order to get a deal, often you’ll see someone sign business contracts who shouldn’t be doing so either on behalf of your company or the other party.

Related Article: Business Contracts – 5 Mistakes To Avoid As An Entrepreneur

B2B Business Contract Signatures

In business-to-business (B2B) agreements, this error frequently happens when a signatory lacks signing authority to bind the party on whose behalf the signature is made. For example, the signatory is a low level employee who cannot bind the company or is a corporate executive who has not been authorized by the employer to do a unique major transaction outside the ordinary course of business (e.g. a high-dollar asset sale or purchase).

B2C Business Agreements

In business-to-consumer (B2C) contracts, it’s a common for a company to erroneously permit a minor sign an agreement instead of having it signed on the minor’s behalf by a custodial parent or legal guardian.

Wrong Capacity

Poorly drafted agreements will often contain signature lines that have signatories sign in the wrong capacity. Two common variations of this mistake occur:

(1) the person signs in their individual capacity instead of on behalf of the business entity they represent; and

(2) the person signs on behalf of a company when the intent was to have impose individual liability on the signatory instead of using the entity as a shield.

Related Article: Business Contracts – Why You Should Avoid Email Deals

Missing Business Contract Signatures

Invariably when there’s a wrong signatory to an agreement (e.g. because of lack of signing authority), there’s also a missing signature that should have been on the contract.

In B2B deals, one of the most common missing signature errors involves having a person sign in more than one capacity. For example, if an entrepreneur is signing an agreement on behalf of a startup limited liability company (LLC) or Subchapter S corporation, you may want the entrepreneur to sign the agreement a second time in the owner’s individual capacity to impose personal liability that encourages performance.

Related Article: 5 B2B Contract Signature Mistakes That Can Bankrupt You

In B2C transactions, perhaps the most common error is to have one spouse sign an agreement as a consumer in situations where the signatures are both spouses’ signatures are needed for the contract to be binding and/or encourage performance because of the risk to marital estate assets if there is a material breach by the consumers.

Need Help With Your Business Agreements?

If you have existing agreement templates you routinely use at your company but are concerned about their signature lines or other potential legal issues, set up a phone consultation with Business Contracts Lawyer Mike Young to discuss what you need and get legal advice.

And if you need a new agreement prepared – either for a unique transaction or as a template to use repeatedly in your business – Attorney Young can prepare that for you too. Be sure to check out our Business Contract Legal Protection Package.