How to avoid cancelling freelancer contracts
Trending across every social network. TV channel and radio station, the coronavirus is a cause for concern for us all. But where do you stand from a legal perspective if work cancels? What can you do to avoid cancelling contracts? We know less than you do on this topic so we asked friend of That Work For Me and independent lawyer, Trusha Patel, for some advice.
With the situation changing daily on the COVID-19 pandemic, freelancers are in unchartered territory. Work is being lost as companies face uncertainty and terminate contracts. Or even worse, Freelancers are being forced to cancel or put contracts on hold due to illness and absence. That means loss of vital income. Whilst the government has made some provisions for small business and the self employed in the Budget, but it is unlikely that this will compensate for everything. So, besides reaching out to your old network to try and plug the gap, what can you do to keep those contracts going?
Does your contract have a right of substitution?
If you are forced to suspend work on a contract, check your terms for a right of substitution clause. Included in most service agreements whether you are operating as a personal service company or a sole trader, this allows you to put forward a suitable substitute to take over or complete the contracted services. Assuming the clause is written in this way, you should get to decide who that person is.
This can be a tricky conversation with a client so you should state that your replacement will have, as a minimum, the same skillset and professional qualifications as you to enable them to complete the task.
It’s never nice handing work off to someone else, doing under stressful circumstances is even more unpleasant. So now is a good time to get your shortlist together. Who could help you out if you do contract COVID-19? Whilst you won’t be able to account for location, availability and to some extent, experience, you can at least put a plan in place to present to clients demonstrating that you have some form of business continuity in place. If no one springs to mind, draw upon your resources – which communities are you a member of? Could you use That Works For Me to reach out and find some options? Is there someone you have bonded with in Doing It For the Kids or Freelance Heroes? There is an ever-growing Facebook group for members which could prove invaluable.
Reach out to some potential options and consider a reciprocal arrangement. Then formalise it. Make sure things like pay are agreed upfront and sub-contractor agreements are in place. Remember that you will still be the client-facing contractor and so should be responsible for paying the substitute for their work.
Does your contract have a right to sub-contract?
If your contract does not include a substitution clause or it is not really practical to trigger, the next best course of action would be to see if you can sub-contract the work out. Your contract with your client needs to allow you to do this and as with substitution, you would be fully responsible for the overall arrangement, including work and payment. This means checking that the sub-contractor has all appropriate insurances in place and that you have a suitable sub-contractor agreement covering data processing amongst other things. You must also check whether you need to notify your client in advance.
If you already rely on sub-contractors in your current business model, speak to them about how they will manage this unusual level of sickness and absence. It could be worth having some alternative options in place too.
Can you rely on force majeure?
If neither of the above are relevant and you find yourself with COVID-19 (that’s the science name for coronavirus), you may be able to rely on a force majeure clause if you have one in your contract with your client.
Enforcing this clause is very much dependent on how it is drafted, what it covers and what is excluded. But the original intent behind this clause is to avoid the contract being terminated when there is a delay in services caused by something beyond the parties’ control.
First you would have to demonstrate that the clause covers this pandemic (words like contagion, epidemic or pandemic would be strongest) as generic references to “acts of God” may be harder to argue. Then you would have to argue that you took all the measures possible to avoid contracting it. Finally you would need to demonstrate that the force majeure event is what directly caused your inability to perform the services. If, for example, you have just travelled back from an affected country or not followed government guidelines on containing or self-isolating, then obviously relying on this clause would be difficult
Other things you can do
Whether you have the above express provisions in your contracts or not, there are still other practical steps you can take to help mitigate the impact on your work. Here are just a few suggestions:
- Start the conversation with your clients now about how you will manage any impact. A proactive approach is always better.
- Offer your clients all possible solutions. Show them your workings and reiterate how committed you are to honouring your contract with them.
- If you come to a mutual agreement around substitution, sub-contracting or even amending or relying on force majeure, always follow up conversations in writing detailing what you have agreed. If needed, seek to formally amend existing contracts with a letter of addendum to avoid any confusion later on
- Whether you have the above express provisions in your contracts or not, there are still other practical steps you can consider taking to help mitigate the impact on your business and work pipeline.
Good luck and stay well.
Bio: Trusha Patel
Trusha is a consultant lawyer with an entrepreneurial background, she works to give small businesses and freelancers peace of mind that they are legally protected and GDPR compliant, with her commercially pragmatic and easy to understand legal advice and contracts.
With 11 years experience spent between a top 3 magic circle (aka leading!) London law firm and international investment banks, Trusha went on to become an entrepreneur for several years before bringing the wealth of insight and a solid business mind back to her legal practice. She founded an organic spice company in Canada where she was living at the time – and then brought it to the UK. Gaining real-world experience across multiple disciplines in international trade with her small business has enabled Trusha to bring a unique legal approach and perspective when helping her clients across a variety of industry sectors.