Written by Harry Croft, Alyce Evans and Principal, Jennifer Tutty
When it comes to running a creative agency, we understand there’s more going on behind the scenes than pitch decks, branding design, content creation and campaign strategies.
There are relationships to manage (with clients, freelancers, employees, talent, venues, suppliers and more), contracts to negotiate, intellectual property being created left, right and centre… and then there’s the actual projects themselves!
By getting on top of your key legals, you’ll set yourself up to run and grow a great creative agency. But what exactly does that involve?
In this week’s blog, we provide a comprehensive ‘key legals’ guide for creative agencies, explaining and providing recommendations for 7 key focus areas:
1. Creative Agency Services Agreement.
2. Client Master Services Agreements.
3. Employment Law – What creative agencies need to know.
4. How to protect your pitch material.
5. Working with freelancers/contractors.
6. Trade marks.
7. Engaging talent.
1. Start strong with a creative agency services agreement
When a client engages you, this is the contract you use to clearly set out all terms of your engagement and contractual relationship.
It should be presented to and signed by your client before you begin work, and contain a clear scope outlining the work you will do, how you will do it and when you will get paid.
Getting your client services agreement signed early on sets good foundations for a clear and transparent working relationship. It will also help to prevent legal and financial issues if client challenges arise.
Key considerations for your creative agency services agreement
A properly drafted client services agreement should take into account (at a minimum):
1. Your agency’s proposal and briefing process
This should cover matters such as… what material is shared with clients before work begins, how quotes are provided, whether you use or implement any software or technology platforms in the quoting and onboarding process, whether your work is primarily project or retainer based, and more.
2. Your agency’s preferred position relating to intellectual property ownership
For example, the contract should make it clear that your creative agency retains ownership in all draft and pitch materials. It should also clarify the scope of the client’s use of final materials. Consider whether you will assign ownership of the IP to the client, or grant them a licence that contains restrictions on usage.
3. Your agency’s payment terms
Payment terms should be set out clearly in the contract. This should include whether (and if so, how) your creative agency can recoup third party expenses from the client. It should also outline what rights your agency has if payment is not made on time.
4. Client’s obligations
In a nutshell, the contract should set out what you need from your client in order to do your job.
5. Approval, revisions, out of scope work
The agreement needs to set out your approval and revisions process as work is completed. When do clients need to respond? Make it clear upfront to avoid troubles down the track. Additionally, outline what happens if a client requests additional, out of scope work.
Who pays for and assumes the risk and liabilities associated with engaging third party suppliers for a project?
6. Delivery times
When is the work due to be delivered? Are these firm dates, or flexible and subject to change?
7. Clients who ‘change their mind’
What happens if a client changes their mind after work has begun?
8. Cancellation terms
When a client can cancel the project…and what costs are payable as a result?
Top tip: Engage a lawyer to create (or update) a client services agreement for your creative agency
If you don’t have a client services agreement at all, now is the time to get one. You should never start work without one!
If you do have one, it may be time for an update!
Changes to the unfair contract terms regime came into force late 2023. As a result, new penalties are in place for non-compliance, meaning that if you have a standard form client services agreement you have been using for years, it might be time to get it reviewed and updated.
When it comes to client services agreements… bespoke is best
With a creative services agreement tailored specifically to your agency, you can enter projects with peace of mind, knowing that you’ll be working on your terms (pun intended!)
Get in touch if you’d like assistance drafting or updating client services agreement.
2. Get legal advice before signing a client’s master services agreement (MSA)
As best practice, we recommend that creative agencies use their own client services agreement. However, we understand that not all clients will want to sign this. Instead, the prospective client may provide your agency with their own version of a Master Services Agreement (MSA).
Often, these agreements will be drafted heavily in favour of the client.
What should you do if your client asks you to sign their MSA?
While working with such clients may present a great commercial opportunity (particularly for larger clients) for your creative agency, it is important to get legal advice early on. A lawyer can assist you to negotiate for better terms, and to reduce the financial, legal and reputational consequences, which could occur if things go wrong.
You can and you should reject clauses that don’t work practically or are unfair.
The start of the engagement is the best time to do this.
Key material risks to watch out for in an MSA include:
– Longer payment terms.
– Strict invoicing requirements.
– Extended work acceptance processes
– One-sided rights relating to payment in the event of a dispute. For example, a clause allowing the client withhold full or partial payment during the dispute.
– The client owning all intellectual property associated with everything you create for the client. The practical effect of such clauses is that clients can claim ownership of not just the final deliverables, but also draft material (e.g. pitch decks, mood boards and any other draft campaign material)!
– Your agency being responsible for and liable to the client for the acts of all suppliers engaged for a project. Such a clause could extend your liability to third party builders, caterers, talent, audio-visual suppliers, florists, graphic designers, third party software and technology provides, other agencies you may have engaged for bespoke requirements of a project and everything in between! This means if anything goes wrong, you could be liable for a big amount of money!
– Broad and unreasonable conflict of interest provisions, which restrict you from working for other clients.
– Stricter obligations relating to confidentiality, privacy and data protection. For example, does the clause require all of your staff to sign additional documentation to confirm that your agency is complying with these obligations?
3. Brush up on your employment law knowledge
A creative agency workforce is often a mix of full-time and part-time, fixed term and casual employees, freelancers and contractors.
Staff might be offered hybrid working arrangements, have flexible working hours, parenting and caring responsibilities or requirements to travel as part of their role.
As an employer, this presents challenges and legal risks that should be properly considered and dealt with.
Key employment law considerations for your creative agency
Creative agencies should consider seeking legal assistance on employment law matters such as:
– Assessing what Awards apply to employees.
– What classification and minimum terms and conditions of employment the agency’s employees are entitled to under those Awards.
– Understanding when casual employment conversion obligations apply to your casual staff.
– Knowing when the limits on using fixed term employment agreements apply.
– Being up to date on your parental, family and domestic violence leave obligations.
– Understanding the risks to the business of incorrectly characterising an employee as a contractor (see our comments further on this below).
Set your creative agency up for success with clear, tailored and properly drafted contracts, documents, policies and more…
Get your creative agency into top legal shape, by engaging a lawyer to review your current contracts, documents and policies (or draft new ones), to ensure that you have clear, tailored and properly drafted…
1. Employment agreements, letters of offer, position descriptions and bonus structures.
2. Workplace policies (for example, relating to hybrid work, annual leave, employer expenses and time off in lieu.
3. Performance management policies, procedures and systems. These should be properly documented at all times.
4. Protect your pitch
Getting new business is an exciting time, but can require a huge amount of preliminary work. This often includes sharing of your agency’s intellectual property and confidential information (e.g. pitch materials, proposals, mock campaigns, and more) with prospective clients.
At law, the starting point is that if your agency is not formally engaged, none of this material should be owned or used by the prospective client. In practice however, this is difficult to enforce without proper documentation in place.
This is an area that often leads to frustration, loss of money and disputes. For example, if at a later date, you see parts of your pitch material reproduced in a campaign delivered by another agency for the client you pitched to!
Tip 1. Sign an NDA
One way to protect your creative agency’s IP and confidential information is to have a properly drafted non-disclosure agreement (NDA).
Also known as a confidentiality agreement, this agreement should be tailored to the type of work your agency does and the material that is shared with prospects before being formally engaged.
Tip 2. Include disclaimers on all pitch material
All pitch material should include clear wording relating to confidentiality, intellectual property ownership and restrictions against sharing pitch material with third parties.
5. Working with freelancers? Read on
Freelance workers are everywhere in the creative industries. Such workers are often characterised and paid by agencies as “contractors”.
Despite this, whether an individual is actually a contractor or employee at law is a question that requires careful consideration of the individual’s working circumstances on a case-by-case basis.
It is crucial for creative agencies to confirm that any contractors they engage are actually contractors (at law).
How to determine whether a worker is an employee or contractor
Although the High Court provided helpful guidance on how to determine the issue in 2023, merely signing a written contractor agreement is not the only determinative factor.
If your agency has a significant level of control, the individual is a core part of the business, they can’t delegate their duties, they are paid an hourly rate and you provide them with equipment… then there is still a real risk that the individual will be an employee at law.
When in doubt, we recommend engaging an employment lawyer to determine whether individuals your creative agency is hiring are, at law, employees or contractors.
Why it’s critical for creative agencies to properly identify contractors and employees
If an individual is legally classed as an employee (rather than a contractor):
– They are is entitled to sick and annual leave.
– Your agency must withhold PAYG and pay superannuation.
– Your agency must ensure it has workers’ compensation insurance in place that covers the employee.
Making a proper assessment on this before engaging a freelancer reduces the risk of your agency engaging in “sham contracting”. It can also can avoid nasty, surprise costs in future (for example, liability for unpaid leave entitlements, unpaid tax and superannuation.
Do you need to pay super to contractors?
When a business is required to pay superannuation to contractors in the creative industry is another issue that is often missed or not understood.
Confusingly, contractors in the creative industries who are classed as a contractor for employment law purposes are often considered ‘employees’ for superannuation guarantee purposes.
This means you must pay super to a fund for them, even though they are a contractor.
If this isn’t paid, the agency is liable to the individual for the unpaid superannuation amount and can be up for penalties from the ATO for non-compliance. The directors of the agency can also be liable to the ATO in their individual capacities.
Always use a contractor agreement
Finally, having no written contractor agreement is a real risk for creative agencies for many reasons, but particularly relating to intellectual property ownership.
Without a written contractor agreement, a contractor does not assign ownership of their intellectual property rights to the business hiring them to do the work.
Yes, you read that correctly.
This means that without a written agreement in place… your creative agency will have no intellectual property rights in any creative material produced by that contractor.
This can (and often does) present real issues for creative agencies if a contractor takes issue with how their material is used or published in the final deliverables provided to the client.
If you have engaged a contractor to complete work without a written agreement, your agency will likely be liable to the contractor (and also probably to your client), as your agency never had the proper legal rights to use that material in the first place.
What to do next
There’s no time like the present. Get in touch with our team to discuss your agency’s contractor agreements, employment agreements, your hiring practices (should you be hiring workers as employees or contractors) and superannuation requirements.
6. Register a trade mark for your creative agency… or a few
A trade mark is a sign (sometimes referred to as a ‘badge of origin’) used by consumers to identify the source of goods and services.
In other words, it is a way for consumers to distinguish goods and services provided by one business from those provided by others.
What can be trade marked?
Trade marks are commonly words or logos.
However, trade marks can also be registered for slogans, colours, pictures, shapes, aspects of packaging, scents, sounds or combinations of these.
What are the benefits of a registered trade mark?
The owner of a registered trade mark will officially own the trade mark and have a legal right to use, licence and sell the trade mark.
Registering your agency’s trade marks in the proper trade mark classes (there are 45 in Australia!) is a great way to protect the value in your brand and provide you with additional tools to enforce your rights against copying – once your trade mark is registered, you have a clear, legal right to stop other people from using your brand.
When should a trade mark be registered?
Trade mark applications should be submitted as early on as possible. We recommend applying to trade mark your creative agency’s core brand assets before you begin using them.
Or, if you are already using them, get your trade mark applications in as soon as possible.
Why? We often have to inform creative agencies who didn’t apply to trade mark their brand assets that:
1. The agency can’t continue to use their brand name, logo or other brand assets; or
2. They don’t have the right to stop another business from using the same branding as them.
Avoid this issue (and a costly rebrand) by getting on top of your trade mark applications as soon as possible!
Teach your clients about trade marks
Additionally, although you should not be providing your clients with legal advice, as a creative agency, you should make your clients generally aware of:
- The benefits of trade marking their brand name, logo or other assets for new businesses, products or campaigns.
- The importance of doing this before clients invest in marketing, packaging and branded product development.
- The risks associated with not trade marking their brand assets.
We regularly work with agencies and brands on all of the above. Speak with us about collaborating with Studio Legal during the branding process.
7. Engage talent properly (hint – use a talent agreement)
Every creative agency that regularly deals with talent should have a properly drafted talent agreement.
This should be tailored to the type of work your agency does. Additionally, it is important to make sure all of your staff understand the terms clearly and know how to use and implement the agreement.
Key considerations for talent agreements
A properly drafted talent agreement should take into account (at a minimum):
– The scope of the talent’s services (what content must be produced, the number of assets).
– Where the content can be published.
– The term and location of the agreement (how long it last and in which territories).
– Whether any exclusivity provisions apply to the arrangement.
– Who owns the intellectual property in the assets created by the talent.
– Who approves the final versions of the content before it is published.
– Payment of fees (including superannuation).
– The laws and relevant codes that apply to the talent’s content (for example, the TGA Code, Australian Association of National Advertisers (AANA) Code of Ethics and Australian Influencer Marketing Council Code of Practice).
Looking for more? Check out some of our other blogs, which provide legal insights and tips for creative agencies:
Written by Harry Croft, Alyce Evans and Principal, Jennifer Tutty
Published 11 December 2023
The information in this article is of a general nature. It does not constitute formal legal advice and should not be relied on as such. Please see the full disclaimer in our website terms. Please contact Studio Legal if you are seeking advice about a specific legal matter.