Freelance Programming Contracts

[Lauxa]

When considering contracting for a certain company, I was handed an employment agreement with a couple of real gems.

2. Contractor’s Representations and Warranties & Indemnity. Contractor represents and warrants the following to the Company: Contractor is an independent contractor and not an employee of the Company; Contractor and the Company are not engaged in a partnership or a joint venture; Contractor shall pay all Contractor’s own federal and state taxes (including F.I.C.A., self-employment tax, unemployment tax, and any payroll taxes); Contractor shall be responsible for providing all necessary equipment and supplies; Contractor is skilled and requires no Company supervision; Contractor performs work for clients other than the Company and such work does not conflict with Contractor’s obligations to the Company; and Contractor is not entitled to participate in any health, retirement, or other benefit plan of the Company. Contractor shall indemnify and hold harmless Company from any and all claims, causes of action, employment taxes or penalties, administrative actions, medical expenses, attorney fees, and any damages whatsoever arising from or in any way related to Contractor’s representations and warranties to Company in this Agreement.

Basically, the legislature has decided that techies are not allowed to contract their services and can only be employees. That's why Steck flew an airplane into a building here in Austin. They're not cracking down on it too hard now, but Obama announced (the day before the crash) that may be about to change. So if the IRS decides that I am not really a contractor, I'd be responsible for all of my employers penalties for committing tax fraud including attorney fees to keep him out of jail, etc.

7. Liquidated Damages. In the event that the Contractor breaches paragraphs 3, 4, 5, or 6 of this Agreement, Contractor agrees that the Company will incur certain damages and costs that are not accurately ascertainable. Therefore, in the event of Contractor’s breach of paragraphs 3, 4, 5, or 6 of this Agreement, the Contractor shall pay to the Company, as liquidated damages, two hundred thousand dollars ($200,000). Payment of that sum by the Contractor will exclude the Contractor from any further monetary damages for breach of paragraphs 3, 4, 5, or 6 this Agreement, but Contractor agrees that the Company will, in addition, still be entitled to injunctive relief, specific performance, and attorney fees if Contractor breaches such paragraphs. The Company and the Contractor both agree that the amount established in this Paragraph as liquidated damages is reasonable under the circumstances existing at the time of the execution of this Agreement.

Yup, that's a $200,000 penalty for ANY breech of contract (even unintentional) and it's awarded through arbitration, not trial (based on another clause). An unscrupulous person could really take advantage of that, you think?

Just wanted to share some of what's out there. Read your contracts, get them reviewed by an attorney, stay safe. I'm trying to renegotiate for more reasonable terms and will let you know how it goes, but it's better not to work than to take on this kind of risk.