Legal
Do I Need a Contract When Hiring a Freelancer? (In Some States, It's Now the Law)
Hiring a freelancer on a handshake feels efficient until the project ends and you discover you don't own the work you paid for. That's not an edge case. It's the default outcome in most copyright systems when nothing was written down.
Without a contract, you probably don't own what you paid for
This is the exposure most hiring businesses underestimate. Under US copyright law the creator owns the copyright by default, and the narrow "work made for hire" exception generally doesn't cover independent contractors unless the work falls into specific listed categories and there's a signed written agreement saying so. Similar defaults apply in the UK, the EU, and most Commonwealth systems. Paying an invoice buys you the deliverable; it doesn't automatically buy the rights to modify it, resell it, or use it beyond the original purpose. If you plan to build on a freelancer's code, rebrand their design, or license their writing onward, you need an explicit written assignment or licence, and it needs to state when the transfer happens, which is usually on full payment rather than on signature.
Where a written contract is legally required
Several jurisdictions have moved this from good practice to legal obligation, and the obligation sits on you as the hiring party. California's Freelance Worker Protection Act (SB 988), effective January 1, 2025, requires a written contract for freelance services over $250 and mandates payment within 30 days when the contract doesn't state a due date. New York's Freelance Isn't Free Act, in force in New York City since 15 May 2017 and statewide since 28 August 2024, sets the threshold at $800 and adds penalties for late payment and for retaliation. Illinois got there first: its Freelance Worker Protection Act was signed on 4 August 2023, took effect 1 July 2024, and applies at $500, counted either in a single contract or in aggregate across all contracts with the same freelancer within a 120-day period, which catches a run of small jobs that individually look exempt. The common shape is the same everywhere: a written agreement, a stated payment date, statutory consequences for missing it. If you hire freelancers across more than one state, drafting to the strictest applicable standard (California's $250) is less work than tracking each one separately.
Misclassification is the risk that costs more than the project
A contract that calls someone an independent contractor does not, on its own, make them one. Tax authorities and labour regulators look at the working relationship: who controls how and when the work is done, whether the person can work for others, who supplies the tools, whether the engagement is open-ended, and whether the work is core to your business. Getting this wrong means back taxes, unpaid benefits, and penalties that can dwarf the original engagement fee. A written contract helps: it's evidence of the intended relationship, deliverable-based rather than hours-based scope, and the freelancer's right to work elsewhere, but only if the day-to-day reality matches it. Don't set a freelancer's daily hours and then rely on the contract to argue they weren't an employee.
What to check before you sign the freelancer's contract
Freelancers increasingly bring their own agreement, which is fine. It just means you're reviewing rather than drafting. Read for five things in particular, because these are where a freelancer-drafted contract will reasonably favour the freelancer.
| Clause | What to look for | Why it matters to you |
|---|---|---|
| IP transfer | Rights assigned on full payment, covering all deliverables | Silence here means you may hold no rights at all |
| Revisions | A stated number of rounds, and the rate beyond it | Unlimited revisions rarely exist; know the real number |
| Acceptance | How and by when you sign off a deliverable | Prevents work being deemed accepted by default |
| Termination | Notice period and what's owed for partial work | Caps your cost if the project ends early |
| Confidentiality | Explicit clause, or a separate NDA | A contract without it leaves your data unprotected |
Frequently asked questions
- Is an email agreement enough when hiring a freelancer?
- It's better than nothing and is often legally binding, but it's a poor substitute for a real contract. An email thread rarely covers IP assignment, confidentiality, acceptance, or termination: the four things that matter most when something goes wrong. Where a written contract is statutorily required, an informal thread may also fail to satisfy the requirement.
- Who should draft the contract, the client or the freelancer?
- Either. Whoever drafts it will lean toward their own interests, so the other side should read it properly rather than assume it's standard. For repeat freelance hires, a short master agreement you issue once plus a per-project scope document is usually less friction than negotiating a fresh contract each time.
- Do I need an NDA as well as a contract?
- Only if the freelancer will access genuinely confidential material: unreleased products, customer data, financials, or source code. Many contracts include a confidentiality clause that covers ordinary cases. A separate NDA is worth it when the sensitivity outlives the project or the freelancer needs access before the main contract is signed.
Sources
- U.S. Copyright Office - Works Made for Hire (Circular 30)
- IRS - Independent contractor (self-employed) or employee?
- Ogletree Deakins - California Governor Signs Freelance Worker Protection Act
- Illinois Department of Labor - Freelance Worker Protection Act
- Epstein Becker Green - Freelance Isn't Free Act Takes Effect Throughout New York State
