Let us start by saying, “We are not lawyers and don’t even play one on TV.” (we didn’t even stay at a Holiday Inn Express recently either! 😙)
We highly recommend taking this non-exhaustive list, discussing it with legal counsel, and having them draft agreements that protect you, your organization, and your brand in the short and long term because conditions can vary from state to state and country to country.
That being said, here are some things to consider when drafting an agreement:
Contract Terms
- Scope of Work: Before work commences, it is vital to clearly define the fractional leader’s responsibilities, deliverables, and performance metrics to avoid misunderstandings. This should include the expected hours of work, specific projects, and timelines. It should also discuss hire-and-fire capabilities, the chain of reporting, and how and when communication should occur during the term of service.
- Duration and Termination: You should specify the contract duration and the conditions under which either party can terminate the agreement including any financial obligations you may have for early termination. If you decide to terminate the relationship before the end of the contract are you obligated to pay them to the end of the contract, up to the last date of service, or a period of time beyond the last working date? This provides flexibility and understanding and protects both parties from abrupt disruptions.
Confidentiality Agreements
- Non-Disclosure Agreements (NDAs): It is imperative that fractional leaders sign NDAs to protect sensitive company information. This is crucial since fractional leaders often work with multiple clients and access proprietary data. You may want to go as far as having your legal team review the non-disclosures they hold with other clients to ensure no conflict of interest or overlap in clients or scope of work.
- Data Protection: Establish protocols for handling confidential information to comply with data protection laws and safeguard business secrets. Remember, when you do not provide digital tools for fractional leadership and allow them to use their own, you open yourself up to a potential data breach. Making sure that fractional leaders maintain security protocols and secure all data could be the difference between you knowing your information and others.
Intellectual Property (IP) Issues
- IP Ownership: You must clearly state in writing who owns the intellectual property created during the fractional leader’s engagement. Typically, companies should retain ownership of any IP developed under the contract. However, there needs to be awareness that some IP is co-created by your team and the fractional leader and with that there might be obligations to share IP and residuals that come from it. Clearly defining this at the beginning could save you from legal entanglements later on.
- Licensing: If the fractional leader brings pre-existing IP or proprietary methods, outline how these will be used and licensed during their tenure. You cannot assume that you will have indefinite use of their IP after they leave and if this IP becomes critical to your go-forward business model, you need to make sure you can secure a long-term license agreement so that you do not have continuity breaks during a period of arbitration.
Legal Compliance
- Independent Contractor Status: Ensure that the contract clearly states the fractional leader’s status as an independent contractor, not an employee. This distinction is important for tax and legal purposes. NOTE: as mentioned above, obligations and rights can vary from state to state and country to country. The devil is in the details!
- Regulatory Compliance: Ensure compliance with relevant employment laws and industry regulations. This includes understanding obligations related to labor laws, non-compete clauses, and professional standards. You also may want to make sure that if they need to be certified, their certifications are up to date and that they are in good standing with the regulatory board. Finding out half-way through a project that the person’s license is under review and may be suspended can create havoc that can be easily avoided with some forethought and due diligence.
Risk Management
- Liability and Indemnification: Include clauses that limit the company’s liability and require the fractional leader to indemnify the company against certain risks. You may also want to specify which jurisdiction any legal matters must be settled in so that you are not obligated to pursue litigation out of state where legal precedent may not favor you. This helps mitigate potential legal exposures.
- Insurance Requirements: Specify any insurance the fractional leader must carry, such as professional liability insurance, to cover potential claims arising from their work. Working with people who carry their own business insurance can ensure that there is someone to litigate against if issues arise.
By addressing these legal and contractual considerations, firms can effectively manage the risks and benefits of hiring fractional leaders, ensuring a productive and secure working relationship. Note: No contract is perfect, and setting up contract start and end dates enables you to review clauses and augment as required.
For further details, you can explore more from these sources:
Chief Outsiders https://www.chiefoutsiders.com
Fractional Jobs https://www.fractionaljobs.io/toolkit
Entrepreneur https://www.entrepreneur.com
Legal Zoom https://www.legalzoom.com/
About Ben Baker
Ben Baker has been a Fractional Chief Communications Officer, Chief Marketing Officer and Chief Podcast Officer for his clients for over a decade.
"The single biggest problem with communication is the illusion that it has taken place.”
- George Bernard Shaw
We help you fix that problem and make sure you are listened to, understood, valued, and engaged with by internal and external clients, prospects and stakeholders in meaningful and profitable ways.
Nick Lamparelli is a 20+ year veteran of the insurance wars. He has a unique vantage point on the insurance industry. From selling home & auto insurance, helping companies with commercial insurance, to being an underwriter with an excess & surplus lines wholesaler to catastrophe modeling Nick has wide experience in the industry. Over past 10 years, Nick has been focused on the insurance analytics of natural catastrophes and big data. Nick serves as our Chief Evangelist.
