We’ve heard of every version of this story from marketing agency owners – legal is a “burden” for agencies.

And we get it. Discussing issues like contracts, IP ownership and legal risk is probably the least entertaining aspect of running your agency’s business.

But you do want to have an agency that’s built for the long-haul, right? Protecting your agency’s key relationships (clients, employees, contractors), as well as its intellectual property and other assets, and minimizing its liability protects the agency’s bottom line.

Based upon the most frequently requested legal services we see at our agency-focused firm, these critical 5 legal agreements should be in every agency’s toolkit to save you time, money and stress.

1.   Master Service Agreement

A Master Service Agreement (“MSA”) covers the legal terms of your agency’s relationship with its clients.  This agreement will typically cover critical terms such as:

• who owns the work product and when and how such work product will be transferred or licensed to the client;
• sequential liability (i.e., making it clear that the client will ultimately be directly liable for certain third-party expenses);
• confidentiality and non-disclosure requirements;
• nonsolicitation of the parties’ employees and contractors;
• indemnification and liability; and
• terms for terminating the relationship

While a typical MSA will cover other important legal topics (e.g., invoicing terms, late fees, dispute resolution terms, etc.), the terms that discuss liability avoidance are perhaps the most fundamental to protecting your business and should always be carefully drafted.

”But we always sign the Client’s MSA document – why do we need our own?”

When an agency is presented with a prospective client’s version of an MSA, the contracted is drafted heavily in favor of the client.  Having your own version of an agency MSA will help you navigate one-sided provisions, and give you a baseline from which to negotiate with the client.

2.   Statement of Work

The details of the services be performed by the agency are typically set out in a Statement of Work (“SOW”), which is incorporated into the MSA.  The SOW generally includes business and money terms like:

• the scope of the services and the deliverables
• the schedule for delivery of the work
• the fees and expenses associated with the performance of the services, including whether third party expenses will be included or billed separately

The SOW is critical in setting client’s expectations before the work has begun and is often drafted in plain language and presented to a prospective client at the outset of the engagement in the form of a proposal.

A well-crafted SOW should also state that no work will commence until the parties have executed the MSA.

For engagements that are considered smaller (either in terms of dollar amount or in time or resource commitment), a shorter set of terms that cover the core legal commitments outlined in an MSA might be included in the SOW so that the SOW alone becomes the entire agreement between the parties.  Having a short form set of terms and conditions is handy in scenarios where you think a full MSA may be overkill or where it might turn a potential smaller project client away.

3.   Employment Agreement

There are a lot of good reasons why every type of business should consider employment contracts.

But because your agency will often deal with the development of creative work product that is subject to intellectual property protection, or with work that involves the implementation of processes that are considered confidential in nature, you’ll want to make sure that all of your employees are respecting the agency’s confidentiality requirements and intellectual property rights.

So in addition to basic employment terms such as salary, benefits or terms concerning the handling of company equipment, an appropriately drafted Employment Agreement should also cover the following legal areas:

• work for hire terms regarding ownership of work product
• confidentiality and non-disclosure requirements
• whether, and how, representative samples of the employee’s work for the agency can be displayed in the employee’s personal portfolio
• non-solicitation of other employees, clients, vendors or contractors
• any non-competition requirements

Remember that promises about work product, confidentiality and competition should line up with what your agency is promising to its clients on these issues.

And while U.S. Copyright law generally provides that work created by an employee for the agency during the scope of their employment is the property of the agency, reiterating this in the Employment Agreement provides an opportunity to make this point clear to your employee.

4.   Independent Contractor Agreement

It’s a fact of agency life that your talent needs will at some point require you to supplement your internal team of employees with freelancers or specialized independent contractors to fulfill client needs. And for every one of these relationships, you’ll need an Independent Contractor Agreement

The Independent Contractor Agreement feels similar in many respects to an Employment Agreement, since it covers legal terms like:

• issues of confidentiality
• intellectual property ownership and the work for hire doctrine
• non-solicitation of clients, employees and other contractors
• contractor’s representations and warranties
• indemnification

However, unlike an employee relationship, work created by an independent contractor is not automatically considered property of the agency under the work made for hire doctrine (even if the agency has paid for it), and therefore U.S. copyright law requires that ownership must be expressly stated in a writing between the parties.

And this agreement can sometimes be used to limit the agency’s exposure to liability by shifting some of the risk to the contractor for claims that arise from the contractor’s work or negligence.

A properly drafted Independent Contract Agreement is a versatile document that can be used for engagements with freelancers that will work alongside your employees on a temporary basis, or with subcontractors you hire for a particular project, and is often used in conjunction with an describing the contractor’s services for the agency.

5.   Mutual Nondisclosure Agreement

The trusty Non-disclosure Agreement (“NDA”) aims to protect everyone’s confidential information in an agency new business situation.

Remember, though, that nondisclosure should be a two-way street. Your prospects are likely only thinking about their protection. It’s up to you to protect the agency when signing an NDA.

The first step? Make the NDA mutual.

NDA’s are useful when pitching ideas to potential clients before they’ve agreed to pay you for them.  Keeping the NDA mutual not only signals that you respect the prospective client’s business, but that you value the insights you will bring to the table before the parties sign the dotted line on an MSA, and makes clear that the ideas and materials involved in the pitch cannot be shared or used with third parties, nor can it be used by the client without engaging your agency.

You might also use an NDA with a third party agency or subcontractor your agency has brought on to jointly pitch a new or existing agency client in order to protect the agency’s original proposals and pitch materials.  Under certain circumstances, a non-circumvention clause, prohibiting the third party from directly engaging with the prospective client without your agency’s involvement, could be added to the NDA to further protect the agency’s work.

Curious about whether your agency needs any of these legal agreements, or whether your current agreements could use a refresh? Whether it’s an overhaul of your current contract system or advice on steps you can take to make sure your agreements are in line with best practices, we’ve got the expertise and experience to help your agency minimize risk and protect valuable work and relationships.

Book your Done-With-You Agency Legal Check-up.