Get It in Writing: Nonprofit Contractor Agreements

Many nonprofits work with contractors in some way, whether to deliver specific services to the population they serve or to support the administrative functions of the organization. All too often, nonprofits overlook the importance of nonprofit contractor agreements, which can create risk for the organization.

Having written agreements in place protects everyone and helps clearly differentiate contracted labor from that of regular employees. Unambiguous language will prevent disputes caused by lack of clarity about a contractor’s role or responsibilities.

As with any legal agreement, it’s best to work with an attorney to create appropriate contract language that aligns with state law and the needs of your organization. Here are a few things to consider when it comes to written contractor agreements.

Define the terms of the agreement

The contract terms should outline what services the contractor is providing, at what rate, and when and how they will be paid. It should also include termination parameters to ensure both parties understand the circumstances under which the contract can be terminated.

The contract should also clearly identify which state laws will govern the contract. If your organization is based in Oklahoma but working with a contractor in another state and the contract does not clearly state that it is governed by Oklahoma laws, a legal dispute could end up requiring legal representation in both states.

Outline any privacy or intellectual property considerations

Nonprofit contractor agreements should also outline any privacy or intellectual property considerations and ownership.

If a contractor has access to personally identifiable information or information that is protected by HIPAA as part of their services, the contract should include requirements both for protecting that data and how to safely return or dispose of it when the contract ends.

Contracts should also detail agreements about ownership of any work produced by the contractor, like whether it was created exclusively for the nonprofit and becomes its intellectual property or the contractor retains the rights and can resell the product. Additionally, contracts need to specify whether a contractor can assign or subcontract any portion of the work to another individual.

Create processes to review and manage payments and contracts

When using contractors, it’s best to require that two signatories review invoices over a certain amount. The people reviewing can verify that the services and amount billed align with the written contractor agreement before approving the payment. While this practice is important for all organizations, it’s especially important when using federal funds to pay contractors.

Another best practice approach includes creating a system to track all contracts and renewal dates. This helps avoid contracts expiring and additional work being performed outside the written contractor agreements. It also creates an opportunity to conduct a market analysis to determine if the contract is set at a fair market rate and make any necessary adjustments. 

Having written contractor agreements in place ensures everyone understands the terms of the agreement, any privacy or intellectual property considerations, and how contract renewals will occur.

If your organization needs support creating contracts for existing or new contractors, contact the Nonprofit Solutions Law team.