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  1. #1
    SitePoint Enthusiast DaDeViL's Avatar
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    Question Freelance Client - Contract length Issue

    Hello,

    I have a client (lets call them Company A) who has sent me a lot of work over the past year or so and we have built a good relationship. I work strictly as a freelancer on only the design and writing css/html for their clients.

    No contract was written because of the level of trust they have in me.

    Company A gets large clients and divides and passes the work to several freelancers and 'manages' the freelancers. Well Company A's client (Company X) really liked my work and wanted to see if they could hire me directly instead of going through Company A.

    Company X felt that Company A was not doing their job because the managers in Company X were actually the ones sending me work, but billing was still being done through Company A (a middleman just collecting the money from my hours). Thus Company X asked me to do work directly for them.

    Company X's web site had already been launched after Company A (and me) finished all the work. So I felt it was safe to tell Company A that in 1 year after launch of Company X's web app, I will be able to work directly for Company X, as must independent contractor agreements require you wait 1 year after completion of a project (I think?).

    Company A was outraged! They claimed that no matter what, as long as Company A has work to do for Company X, Company X is still Company A's client. Even if its 1 year, 5 years, or 10 years ...(forever), I am still obligated to bill through Company A no matter what. Only when Company X 'disengages' Company A as a client, can I do business directly with Company X.

    Is this correct?? Is this how Freelance contracts are made up? I don't see this at all as being fair - how will it be possible for me to do business if I cant directly serve any of these clients that belong to Company A forever?

  2. #2
    SitePoint Zealot SEOCompany's Avatar
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    If I was you. I should have been far more sincere to the company had been giving me work for over one year. If the client wanted to do the work with you and You were fair enough. You should have confirmed, You will work via them.

    Normally this is how we work..and it never makes trouble.

    Letsee what others say about it...

  3. #3
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    1. No contract was written, so you should be able to do anything you want (check with your lawyer...)
    2. because of the level of trust they have in me
      Sounds like you had a gentleman's agreement. Can you live with yourself for violating the trust? Can you live without future work from Company A?


    I think the 1 year "no compete" you mentioned is fair, but it has to be 1 year from the last time Company X gave work to Company A, regardless of when the job you worked on ended. In other words, Company X needs to not give Company A any work for 12 months, then you can fairly accept their work.

    Lastly, now may be a good time to get a contract with Company A to specify expectations.

    John

  4. #4
    SitePoint Zealot
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    i agree, get a contract drawn up from company A..that way ye both know where ye stand in the future and avoid future complications arising

  5. #5
    In memoriam gold trophysilver trophybronze trophy Dan Schulz's Avatar
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    I'll second the contract. NEVER, EVER do any work without a contract. Too many relationships have been ruined because of the lack of one. It doesn't matter if you're doing work for your uncle or the CEO of a Fortune 50 company - always get a contract.

  6. #6
    Life is short. Be happy today! silver trophybronze trophy Sagewing's Avatar
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    As a freelancer, it's unwise to work without an agreement.
    As a company that outsources to freelancers, it's even more unwise.

    I doubt that legally you have any obligation to wait for a year before working directly with Company X. If you feel that ethically that's the thing to do, go for it. It's up to you how much you value these relationships, and any way you handle it it's not good business.

    You said, "No contract was written because of the level of trust they have in me." but that is almost certainly incorrect. No matter how much they trust you, they failed to protect their client or their own business from ordinary risks of working with vendors. Regardless of how much they trust you, there is no no definition of any non-compete agreement between you and it's become an issue.

    The reason there was no agreement is probably the same old reason: lazy business people go without.

    If you are ruining your relationship with company A over this, there is really no reason to wait a year. There is no implied non-compete to my knowledge.

    It makes me wonder about the relationship between company X and company A. This really goes to show you how much relationships are key to a good business!

    One thing is for sure, you NEED a contract with company X because we already know that they POACH other company's subbed out vendors. That is pretty rude, I'd watch out for them!

  7. #7
    SitePoint Enthusiast DaDeViL's Avatar
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    Everyone, great replies!

    I was very sincere in the email when I told them about this, so I really did nothing wrong other than be open about things and my expectations.

    One thing that I assumed is that after 'launch' ALL work was complete and accounted for and Company X had no other work for Company A. That was my mistake and I told them this after the first angry email from them. I think they understood. In any case - the damage has been done and Company A and I agreed to put a contract together, but continue to work together.

    The real reason for this post is that I need to figure out what I can accept when Company A does send me that contract.

    I think the 1 year "no compete" you mentioned is fair, but it has to be 1 year from the last time Company X gave work to Company A, regardless of when the job you worked on ended. In other words, Company X needs to not give Company A any work for 12 months, then you can fairly accept their work.
    I think this is what you are getting at rainmaker: Wait until Company X doesnt send Company A work, then from that point, wait 1 year. Then Company X can be my client directly. Within that first year, I still must bill through Company A.

    Is 1 year usual in freelancer terms, or is 6 months ok? Company X is just eager to send me their work and wants to stop sending it to Company A asap.

    Thanks

  8. #8
    SitePoint Enthusiast
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    You have a good relationship with Company "A" and it is not wise to go around them. The logic of company "X" is simple, they will get same quality work at probably lesser price and faster.

    I suggest you focus on lifetime value of relatioship with Company "A" and not just about the current deal with Company "X".
    Mukul Gupta
    Indus Net Technologies
    _______________________________________
    Design | Development | Internet Marketing

  9. #9
    SitePoint Addict jessebhunt's Avatar
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    First... My clients never deal directly with my freelancers for this exact reason.

    Second... If one of my freelancers ever decided to "go around me" and work directly with my client, it would be the end of my relationship with that freelancer.


    What I don't understand is why you're willing to sacrifice what appears to be a long term, repeat customer for the sake of gaining a new customer which you're already working for anyway, albeit indirectly.

  10. #10
    SitePoint Enthusiast DaDeViL's Avatar
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    Thanks for the replies again.

    This post is not specifically about Company X. It is about what expectations are usually accepted for freelance contracts.

    The situation with Company A is resolved - I will not do any work for Company X directly, until Company X doenst send any work to them...

    I understand Company A's view, BUT I dont want to be bullied in these situations. I need to know what is the accepted length for a non-compete agreement. I know if you are a full time employee...the employer can make you sign a non-compete agreement, but only for a reasonable amount of time after termination of employment. Otherwise it is illegal to make an employee sign a non-compete, if the length of time it too long (not reasonable).

    In freelancing, I bet it is different. Because a freelancer does work on a project by project basis. So if Company X hires me for a completely different project than what I did for Company X before through Company A, then is it fair for Company A to be involved? Especially if they have no hand in it???

    These complexities are what I am after.

  11. #11
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    I think this is what you are getting at rainmaker: Wait until Company X doesnt send Company A work, then from that point, wait 1 year. Then Company X can be my client directly. Within that first year, I still must bill through Company A.
    Well, you don't have to, but if you don't want to kill the relationship with Company A, then you should probably consider it.

    Is 1 year usual in freelancer terms, or is 6 months ok?
    What does your contract say? I think it all boils down to whether or not you value the relationship with Company A more than you value the relationship with Company X. Also, if you burn Company A, they will probably share that info with other contractor managing companies...

    Another option would be to set up a shell company that you could hide behind, and have Company X go to the shell company rather than you directly (even though it's one in the same).

  12. #12
    SitePoint Addict jessebhunt's Avatar
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    Quote Originally Posted by DaDeViL View Post
    I understand Company A's view, BUT I dont want to be bullied in these situations. I need to know what is the accepted length for a non-compete agreement.

    In my opinion, you should never work for your customers' client directly. Period.

    After all, you would have never acquired that contract if your customer hadn't introduced you to them. It's not fair to your customer that you'd then go behind their back and steal future work out from under them.

    I don't guess I understand why you feel bullied by the fact that your customer expects you not to work directly with his clients.


    Here are my thoughts...

    1. You should really have a written agreement outlining what is or isn't acceptable before you take on any more work as a subcontractor.

    2. Your customer is being foolish by giving you direct contact with his client. This whole problem could be avoided if he'd handle all communications between you and the client. Then he wouldn't have to worry about you stealing his clients, and you would still be happy because you'd still be getting the work through your original customer.

  13. #13
    SitePoint Addict jessebhunt's Avatar
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    Quote Originally Posted by rainmakr View Post
    Another option would be to set up a shell company that you could hide behind, and have Company X go to the shell company rather than you directly (even though it's one in the same).
    That seems more unethical than just stealing the client outright!

  14. #14
    SitePoint Enthusiast DaDeViL's Avatar
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    I'm not planning on burning anybody. No shell companies, No going behind the back etc.

    Thing is, Company A is as new at this as I am. So their perception/expectations are going to be just as inexperienced as mine. Thus, I dont want to enter into an agreement that is unfair to either me or Company A. So I'm just asking these questions to learn more about whats accepted/expected in the industry.

    Company A made mistakes with Company X (i'm sure because they are learning). They did not manage freelancers properly - as in, promised Company X project managment, but did not do project management which Company X paid for. So Company X is not happy. Apparently, out of everyone that works at Company A, I am the only person Company X can can talk to and gets a good response from.

    IF Company A deals with all clients like that, then that is not a good sign. It is unethical from their client's perspective and the freelancers, because all Company A is doing is hooking up freelancers with companies, thus doing little more than what elance.com, or guru.com do, yet charging a LOT more and eating away at freelancer profits.

    But I am sure they will learn not to do this as they get more experience and more people working for them...

  15. #15
    Life is short. Be happy today! silver trophybronze trophy Sagewing's Avatar
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    Company A: Irresponsible for not clarifying the agreement with their vendor OR their clients.

    Company X: Rude for poaching a sub-contract from a vendor that they are working with.

    You: Irresponsible for not having a clear agreement with Company A.

    It sounds like there are no real great relationships to save here. Figure out whether you want long-term business from company A (amateurs?) or company B (unscrupulous) and just work with them.

    A one-year non-compete is common in written contracts, but this situation isn't common and there's not much to be lost.

    Best bet: learn from the experience, use written agreements in the future, and seek stronger relationships with better, more mature clients. Don't sweat this too much.

  16. #16
    SitePoint Wizard jimbo_dk's Avatar
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    Quote Originally Posted by Sagewing View Post
    It sounds like there are no real great relationships to save here. Figure out whether you want long-term business from company A (amateurs?) or company B (unscrupulous) and just work with them.
    Exactly. There are no contractual issues here. It's really your call.
    Winners Respond. Losers React.
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  17. #17
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    I think, as previously mentioned, that as you have no contract you are at liberty to do as you please with regard to your clients, it will all come down to ethics and doing what you think is the right thing.

    Whatever you decide, I agree that you should get a written agreement signed by both you and company A and as for the non-compete clause that should also be included with a time frame negotiated as part of the agreement. From the reaction of Company A, I would guess that it doesn't matter if it is six months, one year or 10 years - they would still consider it a betrayal on your part if you did work for one of their clients.

    You may also need to consider that company X probably (maybe?) has a maintenance/development contract with company A and they may be breaching this contract by having the work done elsewhere. Also, make sure you check the ownership of the work you have done too - it may be that company A owns the rights to the website and therefore you would be breaching these rights by working on the site.

    I have been in a similar situation and have seen my company A legally go after a small freelancer after they undertook some work for his client, even though the client had approached the freelancer (who hadn't worked for company A). My company A claimed that they actually owned all design work and therefore it couldn't be reproduced by anybody without thier permission. For this reason I would never accept work from one of company A's clients, even though I don't work there and didn't have an no-competition agreement - its just not worth the agro.

  18. #18
    Floridiot joebert's Avatar
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    The question you have to ask youself is,
    What would I do if this was a test company A was doing to see if I'm cutting their throat ?

  19. #19
    SitePoint Enthusiast neuwill's Avatar
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    In the UK generally speaking if you do not have a contract then there is very little that a company can do to stop you competing with them.

    Generally a non-compete means XX months of your departure from the company you will not solicit any clients or employees.

    I think the only thing to think about here is your level of business with the third-party, is it worth losing over one client or not?

  20. #20
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    Personally i would look at how much they are making of your hardwork. if it's a lot i'd say go for it on your own. You are actually a company not a contractor.

    Obviously Company A feels they are being cheated

    It's business if you ask me, as long as you did not make the first move. Company A should not have given Company X your details this makes them look even more silly and incompetent. And if they start to become more aggressive, did they/you sign/offer you an agreement with all the do's and don'ts like who owns the IP of the property developed.

    The IP is a big B*ST*RD if you ask me...i've seen a case where a company lost out to one of us because of negligence but they tried to screw him big time. A small company closed down becuase of the big company and all because of IP of code "Select CName, CStreet FROM tblMofos WHERE clientCalID = "007" AND TrustLevel = '"BAD"' .

    Look at it this way if they get someone else who charges $70 less than you.... you know you're history..so best to Take care of Number 1.

  21. #21
    SitePoint Evangelist artcoder's Avatar
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    Company A did not manage correctly. If they are outsourcing work to freelancers, they should not let their client Company X know the contact info of the freelancers. Client contact should be limited only between Company A and Company X.

    If company A followed this rule, the situation would not have arise. Although it is true that freelancers will know who company X is, they typically understand that it is unethical for them to contact company A directly. And I do understand that it was not you who contacted Company X, but that Company X contacted you. So you are not at fault for that.

  22. #22
    SitePoint Zealot evilunix's Avatar
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    Go for it. Chances are they are taking more money from your work than you are actually earning yourself!

  23. #23
    SitePoint Wizard jimbo_dk's Avatar
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    Quote Originally Posted by evilunix View Post
    Go for it. Chances are they are taking more money from your work than you are actually earning yourself!
    They have to, else where's the profit for them? That's the way this business model works. If they charged the same amount, he wouldn't have any work to begin with.
    Winners Respond. Losers React.
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  24. #24
    SitePoint Addict stu567blue's Avatar
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    I'd have to agree with everyone on getting a contract drawn up, however, I'm in a similar situation, I have a client that liases with another client that gets me to do website work. When I asked the client whom I speak to if I could contact his client I was told that he would only refer me back to the original client

    So I'd get a contract drawn up for deffinate, and also, I know a 3 channel client can be a pain but at the end of the day if your earnnig from it does it matter how far the client is in line to liasing.

  25. #25
    SitePoint Zealot evilunix's Avatar
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    Quote Originally Posted by jimbo_dk View Post
    They have to, else where's the profit for them? That's the way this business model works. If they charged the same amount, he wouldn't have any work to begin with.
    I think you misunderstood. Say you get paid 20 an hour for a job and your 'employer' charges an extra 20 an hour on top of that for themselves... The business is still making a profit here. What they pay you doesn't come out of the 20 they earn. This is their profit as they are taking your pay into account too when they invoice the client.

    I meant chances are, your 'employer' is paying you 10 and taking 30 for themselves when they have done very little of the work!


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