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Ask HN: Weird consulting contract or is that how consulting works?

by qthrowayq0909 on 1/28/23, 9:37 PM with 6 comments

Hello, I was interviewing with a company (let's call them A) and it went well and we got to a very good offer. But I have to work for them via a third company (kind of consultancy umbrella) which gave me a weird contract.

weird 1: all intellectual property is to be the consulting company's property. How can that be? I mean it'd make sense to be the customers property.

weird 2: I need to get a liability insurance and a very high at that. Shouldn't umbrella provide that? What the heck do they do anyway if they don't even do that?

weird 3: while I work under this contract and for a year afterwards I cannot work in any capacity for ANY customer of the umbrella company (not even as a direct hire).

4. Anything going wrong, the umbrella company is indemnified and I bear the full responsibility. Again. What the heck do we need the umbrella for?

Company A is a global company but the umbrella company is in UK. Dunno, it's annoying that this third party company sprang out of nowhere (why do we need a middleman here?) but it's doubly annoying to have to commit to all these legalese and extra costs.

Is that a normal thing or have I bumped into a weird market spot here?

Tangent: I wanted to try my luck as a contractor at some point but I now realize that you cannot really be a freelancer in the sense that a lot of companies do not hire freelancers but rather contractors working under certain umbrella companies. I find this distressing. Why a freelancer would add a middleman in the mix? I mean isn't the whole point of freelancing to cut away the middlemen?

I'm confused...

  • by anm89 on 1/29/23, 12:04 AM

    I have no idea if this is actually sketchy but:

    If I was doing something sketchy, and I wanted to setup a fall guy just in case, this is exactly the contract I'd write.

    I'd either hard pass on this or just say: I'll work for you without the liability element at normal rates or I'm going to need like 5x rates to take on this liability.

    And even if they said yes to that, I'd then get a lawyer to review the whole thing.

  • by JoeMayoBot on 1/29/23, 3:48 AM

    I've encountered this situation before. It happened because the large company had a process to become an approved vendor. It's a bit like trying to work with the government with delays and red tape. Since they didn't want to wait for me to go through the process, they asked me to sign with one of their established companies. Everything is negotiable. Your leverage is that you're willing to walk and the consequences of that reflect poorly on Umbrella because A has already decided that they want you. On your questions:

    1. Some consultants want ownership of intellectual property. I don't care and it hasn't been a problem for me. You can try to negotiate this. However, it gets more complex because now you have 3 interested parties because it's likely that A wants IP ownership too.

    2. I have liability insurance because it's a common customer ask. My insurance company even sends them coverage so they can verify contract terms.

    3. This is a shady practice that most recruiters engage in. At worst, it essentially keeps you from working by yourself or with a different umbrella because Umbrella has communicated with every major company in town (or even worse if they're a national or international corporation). I would negotiate this clause and get it narrowed until it only pertained to the specific project and was time boxed. That way, you can work on other projects at A and are free to work with any other company. Ideally, they would drop the restriction altogether, but it depends on how much you want the job.

    One more thing that you didn't mention - payment terms. One of the sneaky clauses they add is that they can only pay you if the customer pays them. You want to get that taken out because they will claim they haven't been paid and make you wait. This puts you in a position of weakness on future issues because you'll be concerned about not being paid. If they're reputable, they'll pay you, though it might be good to ask around for other people who have worked with them if you can. My situation was that Umbrella subcontracted me to a 3rd party recruiter who tried not to pay me because Umbrella didn't pay them, which is by design. Fortunately, I had already negotiated the conditional payment clauses out of the contract with well-defined payment terms. When 3rd party tried not to pay me, I evoked the contract and they paid me.

    Good luck.

  • by verdverm on 1/28/23, 9:49 PM

    Sounds like you are getting bad vibes and you should either talk to A and get proper employment or walk away and find a gig that respects you. If company A really wants you, they would do the right thing.

    Umbrella company is a tactic that seems to be growing which uses corporate legal resources to increasingly take advantage of people. The insurance part is normal, the rest smells of asymmetric knowledge and positioning. Typically as a contractor, you have the ability to reuse your skills without restriction. If a company wants to restrict that, they work it into the contract and should provide ample compensation. Contractors and consultants typically have specialized skills. A non-compete would typically have an industry or technology as the determining factor, not that the other companies do business.

    tl;dr it smells and you are probably only getting the first whiffs.