Should you be a freelancer or an employee?

Are you thinking about leaving your company and striking out on your own?

Before you do, you should know the legal advantages and disadvantages to being either a freelancer/independent contractor versus an employee. We list these for each below.

Freelancer/Independent Contractor

Advantages:

  • More freedom. The business you contract with cannot control how or when you do your work, only the end result and when it is due.
  • Intellectual property rights. If you are creating any intellectual property (writing, art, design, etc.) for a business and you have not signed a contract stating that the copyright belongs to the business (“work for hire”), then the copyright by default belongs to you.

Disadvantages:

  • Almost no labor law protection. Many laws that apply to employees don’t apply to you, such as wage and hour laws, unemployment and disability benefits, and even most anti-discrimination laws.
  • Less job security (maybe). Freelancers are hired for a specific project or certain amount of time. However, you may have an ongoing relationship with one or more businesses so that your contract is almost guaranteed to be renewed.

Employee

Advantages

  • Labor laws. You have many rights as an employee, including wage and hour laws, unemployment and disability benefits, and protection against discrimination and harassment by your employer.
  • Employer tools. Your employer must provide you with the tools of the job. However, this may be a disadvantage if you prefer working with your own tools and your employer won’t let you.
  • More job security (maybe). If you do not have an employment agreement specifying something other than “at-will” termination, your employer has the right to fire you at any time for any reason (other than discrimination, or a few other illegal reasons). That said, if an employer is using an “employee” rather than an independent contractor, it probably means they want that person to work for awhile.

Disadvantages

  • Less freedom.  If you are a wage-based employee, your employer may tell you to do pretty much anything, even if it is not in your job description, as long as it is legal.
  • May not have intellectual property rights. By default, your employer “owns” all intellectual property you create for them (unless you have a contract specifying otherwise).

See sources for these laws and more at our pages on independent contractors and employees.

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