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Why Independent Contractors Should Beware of Indemnity Clauses

Cronan Law Firm Can Help Protect Your Business Interests

As the gig economy expands, more companies are looking to independent contractors and freelancers to provide services on an as-need basis. While this is great news for independent contractors seeking a variety of flexible projects, making sure to read the contractor agreement carefully is essential. The section on indemnification, while becoming more ubiquitous, could wreck havoc on freelancers who fail to understand the very contract they are signing.

The Indemnity Clause

These clauses, usually buried deep within the contract, essentially tell an independent contractor that they will hold harmless the company in the event it gets sued, and even pay for all costs to defend and make financially whole the company. This means that if, say, a freelance journalist writes an article and it is published by a major organization, and some reader takes offense to the article’s content and sues the organization, then the freelancer is wholly responsible for any and all costs associated with defending the organization. As a freelancer, you are taking on all the costs associated with having an employee (health care, office space, employment taxes, unemployment, worker’s compensation, etc.) So, why would the freelancer be expected to also bear all the legal risk of the work being done?

Try to Negotiate

First, try to work with the company to see if they can agree to remove the indemnification clause altogether. If not, seek to specify the language. Most indemnity clauses are extremely broad, making the freelancer vulnerable. For instance, the following is an example of a clause that is too broad:

The Contractor agrees to indemnify and hold the Company and its affiliates, subsidiaries, officers, directors, employees and agents free from any and all claims, demands, judgments, damages, liabilities, costs and fees, including reasonable attorneys fees, relating to or arising out of any claim or the defense of any claim that relates either to the performance by Contractor…

The “any and all” language leaves the contractor open to pretty much any issue that arises from their work. Instead, try to negotiate with the company to use more precise language, which will further protect the freelancer.

The Bottom Line

It’s an exciting time to be an independent contractor, but you need to be wary of the language in each independent contractor agreement you sign. If you need assistance in ensuring you are making smart business decisions that will protect you, contact us today for a free consultation.

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