Handling worker contracts
February 4, 2014
By Tonda F. Rush
CEO | NNA
Contracts—how to get free ones, how to enforce them, when you need one—are a constant top question on the National Newspaper Association Business Law Hotline. With revenues remaining tight in the industry, spending money on the newspaper lawyer becomes a tough call. Yet it is as important as buying the right insurance.
Some tips on common newspaper contracts, therefore, and how to go about forming them:
First, resist the temptation to borrow one from someone else. Lay people in the industry pass along their own contracts freely. And contract templates are now freely circulated on the Internet. It’s fine to look at comparisons. Take favorable language from drafts others share. But before you form your own, do consult a lawyer in your own state who is familiar with your state law—particularly when using contracts for newspaper carriers. State laws in this area are fluid and mistakes can be costly.
Second, make sure your lawyer knows how you use your contract. The best template in the world will not protect the newspaper if your staff who oversee the contract do not understand how to use it. Not realizing that contractors cannot be micromanaged is a common error, for example.
Third, watch your language. “We use contract employees,” is a common opener in our calls. There are such things as employees with contracts. But usually our callers mean that they are using independent contractors. If they are employees, you will owe workers compensation coverage, unemployment contributions and state and federal income taxes for them. Not letting yourself slip into thinking of them as your employees for whom you happen not to pay taxes is a good discipline.
Fourth, do have a contract with each one. Federal law requires a written agreement with carriers in order to exempt the newspaper from federal income tax withholding. And federal copyright law requires a written agreement with newsroom content producers—writers, editors and photographers—in order for the newspapers to have a copyright license to use the material. State laws rely heavily on the language in contracts when determining whether an individual is an employee or a contractor.
Fifth, follow the same general principles for all your contractors. Don’t pay by the hour. Pay by the output (e.g., 400 newspapers delivered, five acceptable football game photos, etc.) Give them the maximum latitude on how to get the job done. (Deliver between 3 p.m. Tuesday and 9 a.m. Wednesday, for example.) Don’t micromanage. Instead spell out the quality of the product or service you expect and then stand aside to let your contractor run his or her business.
Sixth, if your contractor does business with another newspaper—even one of your competitors—don’t try to limit him or her. It helps to demonstrate that he or she is really operating a business for multiple customers. Instead, write the contracts to specify what you are buying. (e.g, first publication rights on a story, so you get the material before your competitor does.) And you can require confidentiality on information you don’t wish competitors to have.
Also, avoid paying contractor expenses. This element is becoming trickier as some workers compensation policies now demand that newspapers cover their carriers. Although the requirement may be unavoidable if you want to use your usual policy provider, in general providing insurance for contractors is not advisable. Don’t pay the 56.5 cents mileage allowed by IRS. Instead, estimate how many miles your carrier is likely to cover and increase the compensation by that amount. You can write off the expense and the carrier can claim auto depreciation on his or her taxes.
Finally, of course, issue a 1099 to each contractor who received more than $600 for services during the year by Jan. 31—unless the contractor is incorporated. Then you do not have to make an independent report.